Question

One of the primary limitations of the long-run AD/AS model of equilibrium is:

A. full employment is unknown.
B. changes in aggregate demand do not allow identification of the
long-run equilibrium level of output.
C. it is a dynamic model, so it shows changes over time.
OD. it is a static model, so it shows moments in time.
E. full capacity is unknown.

Answer 1

The long-run AD/AS model of equilibrium has a limitation in identifying the long-run equilibrium level of output due to changes in aggregate demand.

Step-by-step explanation:

One of the primary limitations of the long-run AD/AS model of equilibrium is that changes in aggregate demand do not allow identification of the long-run equilibrium level of output. This is because the long-run AD/AS model assumes that the economy has fully adjusted to any changes in aggregate demand, meaning there is no further room for output to increase or decrease. In reality, the long-run equilibrium level of output may vary due to factors such as technological advancements, changes in labor force, and shifts in long-run aggregate supply.

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