The long-run aggregate supply curve is vertical because in the long run:
A) technological progress outpaces raises in nominal wages.
B) all factors of production increase.
C) the price of labor is flexible, while the price of physical capital is fixed.
D) all prices are flexible.

Question

Quizplus · Accepted Answer

In the long run, all prices are flexible and adjust to changes in supply and demand. This allows firms to adjust production levels and bring the economy back to potential output, causing the long-run aggregate supply curve to be vertical. Choices A, B, and C are incorrect as they do not accurately describe the reason why the long-run aggregate supply curve is vertical.

The Long-Run Aggregate Supply Curve Is Vertical Because in the Long