The long-run aggregate supply line is
A) downward-sloping.
B) upward-sloping.
C) horizontal at the current rate of inflation.
D) vertical at the economy's potential output.
E) vertical at the economy's actual output.

Question

Quizplus · Accepted Answer

The long-run aggregate supply (LRAS) line is a vertical line at the economy's potential output because in the long run, changes in the price level do not affect the amount of output that an economy can produce. Thus, the LRAS line represents the maximum amount of output an economy can produce at full employment of all its factors of production.

The Long-Run Aggregate Supply Line Is