The position of the long-run aggregate supply curve is determined by the aggregate production function and the demand and supply curves for labor.

Question

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The long-run aggregate supply curve is determined by the aggregate production function and the demand and supply curves for labor. In the long run, the economy will reach its potential output level, which is determined by the economy's inputs (labor, capital, technology, etc.) and their productivity. Thus, the position of the long-run aggregate supply curve reflects the economy's productive capacity in the long run.

The Position of the Long-Run Aggregate Supply Curve Is Determined