The long-run aggregate supply curve at the potential level of real GDP is a(n)
A) horizontal line.
B) upward-sloping curve.
C) downward-sloping curve.
D) vertical line.
E) combination of a horizontal line, an upward-sloping curve, and a vertical line.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve at the potential level of real GDP is vertical or a straight line because in the long run, the economy will produce its potential level of output regardless of changes in price levels. In other words, there are no trade-offs between inflation and unemployment in the long run.

The Long-Run Aggregate Supply Curve at the Potential Level of Real