The "long- run aggregate supply curve", vertical at Y^*, shows that A)prices will always rise in the long run. B)potential output is compatible with one particular price level. C)potential output will fall as prices rise. D)potential output will rise as prices rise. E)potential output is compatible with any price level.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve is vertical because it represents the economy's potential output, which is determined by factors like technology and resources, and is not affected by the price level.

The "Long- Run Aggregate Supply Curve", Vertical at Y*

The "Long- Run Aggregate Supply Curve", Vertical at Y^*