The long-run aggregate supply curve is vertical because
A)potential GDP is independent of the price level.
B)actual output can never exceed, even temporarily, the output rate implied by the economy's long-run aggregate supply curve.
C)a vertical long-run aggregate supply curve indicates the maximum output rate that an economy can ever reach.
D)a vertical long-run supply curve indicates that an increase in aggregate demand will lead to a larger real GDP, but not a larger nominal GDP.
E)potential GDP never changes.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve is vertical because potential GDP is independent of the price level in the long run. This means that the economy's maximum sustainable output is determined by factors such as technology, capital, and labor, rather than changes in the price level.

The Long-Run Aggregate Supply Curve Is Vertical Because