The long-run aggregate supply curve is
A)horizontal at the full employment level of real GDP.
B)vertical at the full employment level of real GDP.
C)sloping upward due to the effects of price level changes on output.
D)the same as the short-run aggregate supply curve.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve is vertical at the full employment level of real GDP because in the long run, changes in the price level do not affect the level of output, but only affect the price level itself. Therefore, the LRAS curve represents the maximum sustainable level of output in the economy, which is determined by factors such as technology, capital, and labor.

The Long-Run Aggregate Supply Curve Is