Because the long- run aggregate supply curve is drawn as a vertical line, then we effectively assume that the level of production in the economy is determined solely by:
A) the demand for the goods and services.
B) the price level.
C) the amount of inputs and the level of technology.
D) the wage rate in the economy.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve assumes that the economy has fully adjusted to any changes in the price level and that firms are using the most efficient combination of inputs given the prevailing technology. Therefore, the level of production in the economy is determined solely by the amount of inputs and the level of technology. Demand and wage rate may affect the short-run aggregate supply curve, but in the long run, these factors will adjust and the economy will operate at full production capacity given the level of inputs and technology.

Because the Long- Run Aggregate Supply Curve Is Drawn as a Vertical