The long-run aggregate supply curve illustrates the
A) relationship of the price level and real GDP when the economy is at full employment.
B) relationship of aggregate supply and aggregate demand.
C) amount of products producers offer at various prices when money wages and other resource prices do not change.
D) surpluses, shortages and equilibrium level of GDP.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve illustrates the relationship of the price level and real GDP when the economy is at full employment. This means that in the long run, when all factors of production have adjusted to their equilibrium levels, real GDP will not change with changes in the price level. This is because, in the long run, all input prices adjust with changes in the price level, so there is no incentive for firms to increase or decrease their production levels.

The Long-Run Aggregate Supply Curve Illustrates the