The economy's long-run aggregate supply curve
A) never shifts
B) indicates that in the long run,the price level is constant
C) is shifted by demand shocks
D) is a vertical line at the full-employment level of output
E) is perfectly elastic

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve (LRAS) represents the potential output of an economy when all resources are utilized at their natural rates. It is not affected by changes in the price level, as it is a vertical line at the full-employment level of output. This means that in the long run, changes in demand can only affect the price level, not the level of output. Therefore, choice D is the correct answer.

The Economy's Long-Run Aggregate Supply Curve