Question

Which of the following is not true when the economy is in macroeconomic equilibrium?

a. when the economy is at long-run equilibrium, firms will have excess capacity.
b. when the economy is at long-run equilibrium, SRAS=AD=LRAS.
c. when the economy is at long-run equilibrium, total unemployment=frictional unemployment+structural unemployment.
d. when the economy is at long-run equilibrium, actual GDP= potential GDP.

Answer 1

In macroeconomic equilibrium, the statement that is not true is that firms will have excess capacity. In long-run equilibrium, SRAS=AD=LRAS and actual GDP=potential GDP are true. Additionally, total unemployment=frictional unemployment+structural unemployment is also true.

Step-by-step explanation:

In macroeconomic equilibrium, when the economy is at long-run equilibrium, the statement that is not true is a. when the economy is at long-run equilibrium, firms will have excess capacity. In the long run, firms adjust their production levels to match the level of potential GDP, so there is no excess capacity. In long-run equilibrium, b. SRAS=AD=LRAS and d. actual GDP=potential GDP are true. Additionally, c. total unemployment=frictional unemployment+structural unemployment is also true because in long-run equilibrium, there is no cyclical unemployment.