The long-run aggregate supply curve represents the full-employment capacity of the economy.

Question

Quizplus · Accepted Answer

The long-run aggregate supply (LRAS) curve represents the potential output of an economy when all factors of production are fully utilized, including labor, capital, and technology. This occurs at full-employment equilibrium, where there is no cyclical or structural unemployment. Therefore, the LRAS curve represents the full-employment capacity of the economy.

The Long-Run Aggregate Supply Curve Represents the Full-Employment Capacity of the Economy