If full-employment GDP is equal to $1.9 trillion and the current price level is 130, what does the long-run aggregate supply curve look like?
A)It is a horizontal line at 130 of real GDP.
B)It is a vertical line at a level of real GDP below $1.9 trillion.
C)It is a vertical line at $1.9 trillion of real GDP.
D)It is a vertical line at a price level of 130.
E)It is a horizontal line at a price level of 130.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve is a vertical line at the potential or full-employment GDP, which in this case is given as $1.9 trillion. The price level does not affect the long-run aggregate supply curve, so the vertical line is located at the level of real GDP only.

If Full-Employment GDP Is Equal to $1