Figure 33-2. -Refer to Figure 33-2.The appearance of the long-run aggregate-supply (LRAS)curve A) is inconsistent with the concept of monetary neutrality. B) is consistent with the idea that point A represents a long-run equilibrium but not a short-run equilibrium when the relevant short-run aggregate-supply curve is AS₁. C) indicates that Y₁ is the natural rate of output. D) All of the above are correct.

Question

Quizplus · Accepted Answer

The LRAS curve in Figure 33-2 indicates that Y₁ is the natural rate of output, which means the economy is producing at its potential output level in the long run. The appearance of the LRAS alone does not imply monetary neutrality or the idea that point A is a long-run but not short-run equilibrium. Therefore, options A and B are incorrect.

Figure 33-2. -Refer to Figure 33-2.The Appearance of the Long-Run Aggregate-Supply (LRAS)curve