Long-run aggregate supply and a country's production possibility curve (PPC)
A) are closely related.
B) are inversely related.
C) have no relationship.
D) are examples of microeconomic models.

Question

Quizplus · Accepted Answer

Long-run aggregate supply (LRAS) and a country's production possibility curve (PPC) are closely related because LRAS shows the maximum potential output that an economy can produce in the long run, while a PPC shows the maximum possible output that an economy can produce with its available resources. LRAS determines the position of the vertical axis of the PPC, as it represents the maximum potential output that a country can produce at any given time. Therefore, LRAS and a country's PPC are interdependent, and changes in LRAS will result in shifts in the PPC.

Long-Run Aggregate Supply and a Country's Production Possibility Curve (PPC)