In the long run, the aggregate supply curve of an economy is:
A)upward sloping.
B)downward sloping.
C)horizontal.
D)vertical.

Question

Quizplus · Accepted Answer

In the long run, the aggregate supply curve of an economy is vertical because in the long run, all prices are flexible and can adjust to changes in demand and supply, resulting in full employment of resources at the economy's potential output level. In this situation, changes in aggregate demand will only lead to changes in the price level, without affecting the level of output. Thus, the aggregate supply is fixed in the long run, resulting in a vertical curve.

In the Long Run, the Aggregate Supply Curve of an Economy