The long-run aggregate supply curve assumes that
A) the unemployment rate is more than 9 percent.
B) all factors of production are fully employed.
C) only laborers are fully employed.
D) there is no government purchasing of goods and services.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve assumes that all factors of production are fully employed, meaning that the economy is operating at its natural level of output. This includes full employment of labor, capital, and other resources. Therefore, option B is the correct choice. Option A is incorrect because it specifies a specific unemployment rate, which is not necessarily related to the long-run aggregate supply curve. Option C is incorrect because it assumes that only labor is important for production, which is not accurate. Option D is incorrect because it refers to government purchasing, which is not relevant to the long-run aggregate supply curve.

The Long-Run Aggregate Supply Curve Assumes That