AP Macroeconomics Flashcards: Long-Run Self-Adjustment
Written by AP Content Team, Verified for 2026 AP Exams, Last updated: May 2026
Review key ideas with interactive flashcards. This set includes 10 cards to help you master important concepts.
What is the key mechanism that enables long-run self-adjustment in an economy?
The key mechanism is the flexibility of wages and prices, which allows them to adjust over time in response to economic shocks.
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What is the key mechanism that enables long-run self-adjustment in an economy?
The key mechanism is the flexibility of wages and prices, which allows them to adjust over time in response to economic shocks.
What do shifts in the long-run aggregate supply (LRAS) curve indicate?
Shifts in the LRAS curve indicate changes in the full-employment level of output and signify long-term economic growth.
What is long-run self-adjustment?
It is the process where, in the absence of government policy, flexible wages and prices adjust to restore full employment and the natural rate of unemployment after a shock.
Following a negative aggregate demand shock that creates a recession, how do wages and prices respond in the long run to restore full employment?
Flexible wages and prices will fall, which in turn shifts the short-run aggregate supply curve, moving the economy back to its full-employment level of output.
What condition is assumed for the long-run self-adjustment mechanism to work?
The model assumes the absence of government policy actions, relying solely on market forces to correct the economy.
What is the ultimate state of output and employment after the long-run self-adjustment process is complete?
Output is restored to the full-employment level, and employment is restored such that the unemployment rate is at its natural rate.
Define the full-employment level of output.
This is the level of output an economy produces when unemployment is at its natural rate, and it is represented by the long-run aggregate supply curve.
After an aggregate demand or supply shock, what does the unemployment rate revert to in the long run?
In the long run, after a shock, unemployment will revert to its natural rate as the economy self-adjusts.
If a negative short-run aggregate supply shock occurs, what happens to wages to facilitate the long-run adjustment back to full employment?
The high unemployment caused by the shock will eventually put downward pressure on wages, causing the SRAS curve to shift back and restore full employment.
What is the long-run impact of an aggregate demand shock on output and the price level?
In the long run, an aggregate demand shock only changes the price level; the level of output returns to the full-employment level.