If there was no profit effect,but there was a misperception effect in the short run,how would the SRAS and LRAS curve be drawn?
A)The SRAS and LRAS would both be vertical.
B)The SRAS would be vertical and the LRAS would be upward sloping.
C)The SRAS would be upward sloping and the LRAS would be vertical.
D)The SRAS and LRAS would both be upward sloping.

Question

Quizplus · Accepted Answer

The SRAS is upward sloping due to misperceptions about prices, while the LRAS is vertical as it represents the economy's potential output, unaffected by price levels.

If There Was No Profit Effect,but There Was a Misperception