The long- run aggregate supply curve is vertical because
A)a vertical long- run aggregate supply curve indicates the maximum output rate that an economy can ever attain.
B)a vertical long- run supply curve indicates that an increase in aggregate demand will lead to greater real GDP, but not greater nominal GDP.
C)potential GDP never changes.
D)actual output can never exceed, even temporarily, the quantity of output determined by the economy's long- run aggregate supply curve.
E)potential GDP is independent of the price level.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve is vertical because it represents the point where an economy is producing at its maximum sustainable capacity, which is determined by factors like technology, resources, and labor. These factors, and thus the potential GDP, are independent of the price level, meaning changes in the price level do not affect the quantity of goods and services the economy is capable of producing in the long run.

The Long- Run Aggregate Supply Curve Is Vertical Because