The long-run aggregate supply curve uses the classical assumptions that all variables are _____ in the long run and that long-run equilibrium occurs at _____ employment.
A) flexible; full
B) flexible; less than full
C) fixed; less than full
D) fixed; full

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve is based on classical assumptions which suggest that all variables are flexible in the long run and that the economy will naturally tend towards full employment in the long run. Therefore, the correct choice is A, which states that all variables are flexible and long-run equilibrium occurs at full employment.

The Long-Run Aggregate Supply Curve Uses the Classical Assumptions That