The long-run aggregate supply curve
A) relates the level of nominal output produced by firms to the implicit price deflator.
B) relates the level of output produced by firms to the price level in the long run.
C) is vertical because there is one price level and an infinite number of outputs.
D) is determined by the real output demanded by economic agents in an economy.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve relates the level of output produced by firms to the price level in the long run. This is because in the long run, all factors of production are assumed to be variable, meaning that firms can adjust their inputs to respond to changes in prices. As a result, the long-run aggregate supply curve is vertical, indicating that changes in the price level have no effect on the quantity of output supplied in the long run.

The Long-Run Aggregate Supply Curve