If the long-run aggregate supply curve is vertical, the multiplier effect of a change in net taxes on aggregate output in the long run
A) depends on the price level.
B) is one.
C) is zero.
D) is infinitely large.

Question

Quizplus · Accepted Answer

If the long-run aggregate supply curve is vertical, it means that output in the long run is determined by the economy's potential output or the economy's productive capacity, not influenced by changes in prices or demand factors. Therefore, the multiplier effect of a change in net taxes, which is measured by the change in aggregate output, would be zero in the long run because potential output remains unaffected.

If the Long-Run Aggregate Supply Curve Is Vertical, the Multiplier