The long- run aggregate supply curve is
A) the same as the short- run aggregate supply curve.
B) horizontal at the full employment price level.
C) vertical at the full employment level of real GDP.
D) upward sloping because of the effects of price level changes on real GDP.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve (LRAS) is vertical at the full employment level of real GDP because in the long run, all factors of production are assumed to be fully utilized at their natural rates. This means that increases in the price level will not lead to an increase in output in the long run, as there are no spare resources to be employed.

The Long- Run Aggregate Supply Curve Is