Consider the AD/AS model.Since output in the long run is determined by Y^*,the only role of the AD curve is to determine the price level.This is true because A)Y^* is independent of the price level. B)the aggregate demand curve is vertical. C)the aggregate demand curve is horizontal. D)Y^* depends on the price level. E)the AS curve is upward sloping.

Question

Quizplus · Accepted Answer

In the long-run, output is determined by factors such as technology, resources, and labor, which are all encapsulated in the Y^* notation, indicating the long-run supply. This output level is independent of the price level, which is why the AD curve's primary role in the long run is to determine the price level, not output.

Consider the AD/AS Model