The long-run aggregate supply curve is vertical at $12 trillion but the short-run aggregate supply curve intersects the aggregate demand curve at $13 trillion. We know that
A) adjustments will occur so that the long-run aggregate supply equals $13 trillion.
B) the economy is producing below full employment in the short run, and will adjust by hiring more workers, thus decreasing unemployment.
C) the price level is too high. The long-run equilibrium will occur with a lower price level.
D) adjustments will occur so that the short-run aggregate supply eventually intersects the aggregate demand curve at $12 trillion.

Question

Quizplus · Accepted Answer

In the long run, the economy will adjust to produce at the full employment level, which is $12 trillion, where the long-run aggregate supply is vertical.

The Long-Run Aggregate Supply Curve Is Vertical at $12 Trillion