The long- run aggregate supply curve is vertical because:
A) prices are sticky in the long run.
B) the labor market is always in shortage.
C) wages are flexible and they always change quickly to clear the labor market.
D) unemployment exists.

Question

Quizplus · Accepted Answer

The long-run aggregate supply (LRAS) curve is vertical because in the long run wages are flexible and can adjust to changes in the economy, allowing the labor market to clear. This means that changes in the price level will not affect the quantity of output supplied in the long run, as firms will always be able to hire the amount of labor they need at the prevailing wage rate. Therefore, the LRAS curve is a representation of potential output, which is determined by the economy's factors of production, rather than the price level.

The Long- Run Aggregate Supply Curve Is Vertical Because