We draw the long-run aggregate supply curve as a vertical line to reflect the fact that
A) the productive capacity of the economy never changes after full adjustment has occurred.
B) changes in the price level do not alter the level of long-run real GDP after full adjustment has occurred.
C) technology and resource endowments do not affect long-run real GDP after full adjustment has occurred.
D) an accurate depiction of the production possibilities curve is vertical after full adjustment has occurred.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve is drawn as a vertical line because changes in the price level do not alter the level of long-run real GDP after full adjustment has occurred. In the long run, the economy's productive capacity can change due to changes in technology and resource endowments, but these changes do not affect the long-run equilibrium level of output. Therefore, the long-run aggregate supply curve is vertical at the potential level of output.

We Draw the Long-Run Aggregate Supply Curve as a Vertical