The long-run aggregate supply curve
A)is vertical.
B)is a graphical representation of the classical dichotomy.
C)indicates monetary neutrality in the long run.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve (LRAS) is vertical, indicating that changes in the aggregate price level have no effect on the quantity of goods and services supplied in the long run. This concept is a graphical representation of the classical dichotomy, which separates real variables (such as output and employment) from nominal variables (such as the price level). Monetary neutrality, or the idea that changes in the money supply do not affect real variables in the long run, is also represented by the LRAS curve. Therefore, all of the choices presented in the question are correct.

The Long-Run Aggregate Supply Curve