On the long-run aggregate supply curve,
A)a decrease in the price level decreases the level of potential GDP.
B)a decrease in the price level increases the aggregate quantity of GDP supplied.
C)a decrease in the price level decreases the aggregate quantity of GDP supplied.
D)a decrease in the price level has no effect on the aggregate quantity of GDP supplied.
E)only decreases in the price level caused by shifts in aggregate demand increase the aggregate quantity of GDP supplied.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve is vertical, indicating that changes in the price level do not affect the aggregate quantity of GDP supplied. This is because, in the long run, the economy's output is determined by factors such as technology and resources, not by the price level.

On the Long-Run Aggregate Supply Curve