The point where the long-run aggregate supply curve intersects the horizontal axis is:
A)the point that reflects the economy's actual output
B)the point that reflects the economy's actual output.
C)the economy's potential output
D)the economy's potential output.
E)the level of real GDP the economy would produce if all prices were flexible and wages were fixed
F)the level of real GDP the economy would produce if all prices were flexible and wages were fixed.
G)impossible to attain
H)impossible to attain.

Question

Quizplus · Accepted Answer

The point where the long-run aggregate supply curve intersects the horizontal axis is the economy's potential output, which is the maximum sustainable output level taking into account all inputs, including labor, capital, and technology. This point represents the level of output that can be achieved when all resources are fully utilized, and it is not impossible to attain. Option A and B are incorrect because the question is asking about the long-run aggregate supply curve, not the actual output. Option E and F may be correct, but they are not as precise as option D because they only refer to a hypothetical situation where prices are flexible and wages are fixed, while option D encompasses all factors that can affect the economy's potential output. Option G and H are not correct because the potential output is not impossible to attain, although it may require some adjustments in the economy's policies or structure.

The Point Where the Long-Run Aggregate Supply Curve Intersects the Horizontal