Explain the relationship of the long-run aggregate supply curve, ...

[wenmo]

Explain the relationship of the long-run aggregate supply curve, the short-run aggregate supply curve and the aggregate demand curve in determining a long-run and short-run macroeconomic equilibrium.
 
  What will be an ideal response?

Question 2

In the above figure, if the price is 8 per unit, how many units will a profit maximizing perfectly competitive firm produce?
 
  A) 5
  B) 20
  C) 30
  D) 35

[shaikhs]

Answer to Question 1

Short-run macroeconomic equilibrium occurs when the quantity of GDP demanded equals the quantity supplied, which is where the AD and SAS curves intersect. The short-run equilibrium does not necessarily take place at full employment. The long-run macroeconomic equilibrium occurs when real GDP equals potential GDP. This means that the economy is on the LAS curve, where the AD and SAS curves both intersect the LAS curve.

Answer to Question 2

B