The point where the long-run aggregate supply curve intercepts the horizontal axis is:
A) the point that reflects the economy's actual output.
B) the economy's potential output.
C) the level of real GDP the economy would produce if all prices were flexible and wages were fixed.
D) impossible to attain.

Question

Quizplus · Accepted Answer

The point where the long-run aggregate supply curve intercepts the horizontal axis is the economy's potential output, meaning the level of real GDP the economy would produce if all factors of production were fully utilized and all prices were flexible. This level of output is achievable in the long run, though it may not be attainable in the short run.

The Point Where the Long-Run Aggregate Supply Curve Intercepts the Horizontal