The long-run aggregate supply curve intersects the horizontal axis at the:
A) potential level of output.
B) current level of output.
C) expected rate of inflation.
D) actual rate of inflation.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve represents the economy's potential level of output, which is the maximum sustainable level of production. Therefore, the curve intersects the horizontal axis at the potential level of output, which is the level of real GDP that can be produced when all resources are fully employed and there is no inflationary or recessionary gap. Choices B, C, and D are incorrect because they do not represent the intersection point of the long-run aggregate supply curve.

The Long-Run Aggregate Supply Curve Intersects the Horizontal Axis at The