The short-run aggregate supply curve shows ________ while the long-run aggregate supply curve shows ________.
A)potential output; the current inflation rate
B)output; aggregate spending
C)potential output; aggregate spending
D)the current inflation rate; potential output

Question

Quizplus · Accepted Answer

The short-run aggregate supply (SRAS)line is a horizontal line that shows the current rate of inflation in the economy, as determined by past expectations of inflation and past pricing decisions. The long-run aggregate supply (LRAS)line is vertical at the economy's potential output and illustrates the economy's long-run productive capacity or potential output.

The Short-Run Aggregate Supply Curve Shows ________ While the Long-Run