Long run
Definition
The long run refers to a period of time in which all input factors can be adjusted by firms. It reflects a timeframe where all temporary fluctuations have subsided and an economy has reached its potential output level.
Related terms
Potential Output: Potential output represents an economy's maximum sustainable production level under normal conditions with full utilization of resources. It serves as a benchmark for measuring economic performance.
Factors of Production: Factors of production are the resources used in producing goods and services: land/natural resources, labor/workers, capital/machinery/buildings, and entrepreneurship. These factors contribute to an economy's output.
Economic Growth: Economic growth refers to the increase in a country's production of goods and services over time. It is measured by changes in gross domestic product (GDP) and reflects improvements in living standards.
"Long run" appears in:
Subjects (1)
Practice Questions (9)
What is the key factor that determines an economy's ability to self-adjust in the long run?
What is the impact of shocks on the aggregate demand (AD) curve and the economy in the short run and long run?
Why does the unemployment rate remain constant in the long run?
In the long run, is there a trade-off between inflation and unemployment?
In the long run, the unemployment rate stays at:
What is the relationship between the growth rate of money and inflation in the long run according to the quantity theory of money?
How does an increase in the money supply typically affect the rate of inflation in the long run?
What is the result of a decrease in the money supply on the price level in the long run, assuming the velocity of money and real GDP remain constant?
What can high government borrowing lead to in the long run?
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