The long-run aggregate supply curve is vertical because
A) potential GDP is independent of the price level.
B) there is no cyclical inflation.
C) at full employment prices are stable.
D) the money wage rate increases faster than the price level.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve is vertical because it represents the level of potential output, which is independent of the price level. In the long run, changes in the price level will not affect the economy's ability to produce goods and services at its potential level. Therefore, the long-run aggregate supply curve is a vertical line at the level of potential GDP.

The Long-Run Aggregate Supply Curve Is Vertical Because