Because we have full employment at the level of potential output,
A)aggregate demand is downward sloping.
B)aggregate demand is upward sloping.
C)the long-run aggregate supply curve is upward sloping at potential output.
D)the long-run aggregate supply curve is vertical at potential output .

Question

Quizplus · Accepted Answer

Full employment at potential output indicates that the economy is at its long-run equilibrium where there is no cyclical unemployment or output gap. In this situation, the long-run aggregate supply curve is vertical at potential output since the production capacity and resources of the economy are fully utilized, and any increase in aggregate demand can only lead to higher prices without affecting the output level.

Because We Have Full Employment at the Level of Potential