Long-Run Equilibrium

The equilibrium in the long-run is shown by the intersection of the AD curve, the SAS curve, and the Long-Run Aggregate Supply (LAS) curve. Since LAS represents potential output, a shift in the AD curve will only result in a change in price level: a shift to the right increasing price level and a shift to the left decreasing price level. If an economy is said to be in long-run equilibrium, then Real GDP is at its potential output, the actual unemployment rate will equal the natural rate of unemployment (about 6%), and the actual price level will equal the anticipated price level.