Exhibit 14A-2 Macro AD-AS Model In Exhibit 14A-2, the long-run aggregate supply curve represents:
A) potential real GDP output for this economy.
B) that the economy is experiencing zero inflation.
C) that the economy is experiencing a recessionary gap.
D) the level of real GDP where the unemployment rate is zero.

Question

Exhibit 14A-2  Macro AD-AS Model  In Exhibit 14A-2, the long-run aggregate supply curve represents:
A) potential real GDP output for this economy. 
B) that the economy is experiencing zero inflation. 
C) that the economy is experiencing a recessionary gap. 
D) the level of real GDP where the unemployment rate is zero.

Quizplus · Accepted Answer

The long-run aggregate supply curve represents the potential output of real GDP for the economy in the long run when all resources are fully utilized, and there are no supply-side constraints. Therefore, option A is the correct answer.

Exhibit 14A-2 Macro AD-AS Model in Exhibit 14A-2, the Long-Run