In the long-run
A) real GDP is equal to potential GDP.
B) the aggregate supply curve is upward sloping.
C) aggregate supply depends on the price level.
D) All of the above answers are correct.

Question

Quizplus · Accepted Answer

In the long-run, the economy reaches its potential output level, meaning real GDP is equal to potential GDP. This is due to the fact that in the long-run, all resources are fully utilized and technology is optimized. The aggregate supply curve is vertical at potential GDP in the long-run, meaning it is not dependent on the price level. Therefore, choice B and C are incorrect.

In the Long-Run