In the extended aggregate demand-aggregate supply model,
A) long-run equilibrium occurs wherever the aggregate demand curve intersects the short-run aggregate supply curve.
B) the long-run aggregate supply curve is horizontal.
C) the level of real output is the same in the long run regardless of the location of the aggregate demand curve.
D) the short-run aggregate supply curve is downsloping.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve is vertical, reflecting the idea that the level of real output in the long run is determined by factors such as capital, labor, and technology, rather than the price level. This means that in the long run, the economy's output is the same regardless of where the aggregate demand curve is located.

In the Extended Aggregate Demand-Aggregate Supply Model