The shape of the long-run aggregate supply curve implies that, in the long run, _____.
A) inﬂation and GDP are negatively related
B) the rate of inﬂation is constant
C) inﬂation increases faster than nominal wages
D) output is inﬂation inelastic.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve is vertical, indicating that in the long run, the total output (real GDP) is determined by the economy's resources (factors of production) and technology, not by the price level. This implies that output is not affected by changes in the price level, or in other words, it is inflation inelastic.

The Shape of the Long-Run Aggregate Supply Curve Implies That