The long- run aggregate supply curve
A) is positively sloped.
B) is horizontal at the level of potential GDP.
C) is negatively sloped.
D) is vertical at the level of potential GDP.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve is vertical at the level of potential GDP because in the long run, changes in aggregate demand only affect the price level, not output. Therefore, the level of potential GDP is the maximum level of output that can be sustained in the long run.

The Long- Run Aggregate Supply Curve