The long-run aggregate supply curve is vertical because in the long run:
A) technological progress outpaces raises in nominal wages.
B) all factors of production increase.
C) the price of labour is flexible,while the price of physical capital is fixed.
D) all prices are flexible.

Question

Quizplus · Accepted Answer

In the long run, all prices are flexible, including wages and prices of physical capital. This means that firms can adjust their prices and production levels to changes in demand and supply, without affecting the overall output of the economy. Hence, the long-run aggregate supply curve is vertical, indicating that changes in aggregate demand do not affect the economy's potential output level in the long run.

The Long-Run Aggregate Supply Curve Is Vertical Because in the Long