The long-run aggregate supply curve
A)is horizontal.
B)indicates the economy's real output under conditions of full employment.
C)shows that changes in real GDP are sensitive to changes in the price level.
D)slopes up and to the right.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve indicates the potential output of the economy under conditions of full employment, where all resources are being fully utilized. It is vertical or nearly vertical, indicating that changes in the price level do not affect the economy's long-run potential output. Therefore, the correct answer is B.

The Long-Run Aggregate Supply Curve