Consider the AD/AS model.Since output in the long run is determined by Y*,the only role of the AD curve is to determine the price level.This is true because
A)Y* is independent of the price level.
B)the aggregate demand curve is vertical.
C)the aggregate demand curve is horizontal.
D)Y* depends on the price level.
E)the AS curve is upward sloping.

Question

Quizplus · Accepted Answer

Y* (long-run output) is determined by factors such as technology, resources, and institutions, which are independent of the price level. This is why the AD curve's role in the long run is limited to determining the price level, as changes in the price level do not affect Y*.

Consider the AD/AS Model