The long-run aggregate supply curve (LAS) is vertical because
A) the quantity of potential real GDP does not change when the price level changes.
B) real GDP can never be greater than potential GDP.
C) businesses do not have any incentive to produce more than potential GDP.
D) the price level does not change when the quantity of potential real GDP changes.
E) potential GDP never changes.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve (LAS) is vertical because potential real GDP does not change when the price level changes. This means that the economy can produce a constant level of output in the long-run regardless of changes in the price level.

The Long-Run Aggregate Supply Curve (LAS) Is Vertical Because