The vertical long-run aggregate supply curve reflects the fact that in the long run, an increase in the price level
A) will not alter the economy's maximum sustainable rate of output.
B) will increase the economy's maximum sustainable rate of output.
C) will reduce the quantity of goods and services purchasers will demand.
D) will improve the overall efficiency of resource use.

Question

Quizplus · Accepted Answer

In the long run, prices and wages are flexible, and all inputs (including labor, capital, and technology) can be adjusted. This means that an increase in the price level will not affect the economy's maximum sustainable rate of output, as all resources can be brought back into equilibrium. Therefore, the vertical long-run aggregate supply curve reflects the idea that potential output is independent of price level changes.

The Vertical Long-Run Aggregate Supply Curve Reflects the Fact That