Which of the following statements is TRUE?
A) The long-run aggregate demand curve is upward sloping.
B) The long-run aggregate supply curve is upward sloping.
C) The short-run aggregate supply curve is vertical.
D) The long-run aggregate supply curve is vertical.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve is vertical because in the long run, all inputs can be adjusted and the economy operates at its potential output level. The short-run aggregate supply curve is upward sloping because some inputs may be fixed in the short run, and an increase in demand may lead to an increase in prices due to a temporary shortage of goods and services. The long-run aggregate demand curve is also vertical because in the long run, the economy operates at its potential output level regardless of the price level.

Which of the Following Statements Is TRUE