The long-run aggregate supply curve of an economy corresponds to
A) a point inside the production possibilities curve.
B) a point outside the production possibilities curve.
C) a point on the production possibilities curve.
D) none of the above: there is no relationship between the long-run aggregate supply curve and the production possibilities curve.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve of an economy corresponds to a point on the production possibilities curve. This is because in the long run, all resources are fully employed and the economy is operating at its potential, which corresponds to a point on the production possibilities curve where all resources are being used efficiently.

The Long-Run Aggregate Supply Curve of an Economy Corresponds to