The long-run aggregate supply curve is vertical
A) because the rate of inﬂation is steady in the long run.
B) because resource prices eventually rise and fall with product prices.
C) because product prices tend to increase at a faster rate than resource prices.
D) only when the money supply increases at the same rate as real GDP.

Question

Quizplus · Accepted Answer

In the long run, resource prices adjust to changes in product prices, resulting in a vertical long-run aggregate supply curve. As product prices increase, resource prices also increase, leading to no change in the overall level of output. Therefore, the long-run aggregate supply curve is vertical because resource prices eventually rise and fall with product prices.

The Long-Run Aggregate Supply Curve Is Vertical