The long- run aggregate supply curve is the relationship between the quantity of real GDP supplied and _ _ when _ .
A) the price level; real GDP equals potential GDP
B) real GDP demanded; the wage rate is constant
C) real GDP demanded; the price level does not change
D) the price level; real GDP equals nominal GDP

Question

Quizplus · Accepted Answer

The long-run aggregate supply (LRAS) curve is a vertical line at potential GDP, showing the maximum amount of goods and services that an economy can produce when all resources are fully employed. The LRAS curve is independent of the price level, as changes in the price level do not affect the economy's ability to produce. Therefore, the LRAS curve represents the relationship between the quantity of real GDP supplied and real GDP when it equals potential GDP.

The Long- Run Aggregate Supply Curve Is the Relationship Between