When the long-run aggregate supply curve is drawn as a vertical line, the theorist is assuming that
A) the economy tends to move toward full employment in the long run.
B) the economy tends to produce stable prices in the long run.
C) the economy is stagnating at a low level of growth.
D) shifting aggregate demand can change the level of employment in the long run.

Question

Quizplus · Accepted Answer

The vertical long-run aggregate supply curve reflects the idea that the economy's potential output is determined by its resources, technology, and institutions, and is not influenced by the price level in the long run. This implies that the economy moves toward full employment in the long run, regardless of fluctuations in aggregate demand.

When the Long-Run Aggregate Supply Curve Is Drawn as a Vertical