Which of the following is TRUE about the long-run aggregate supply curve?
A) It is vertical at the level of potential GDP.
B) It shows the relationship between the price level and real GDP when the economy is at full employment.
C) It does not shift in response to temporary changes in aggregate demand.
D) All of the above statements are true.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve is vertical at the level of potential GDP, indicating that in the long run, the total output of an economy is not affected by the price level. It represents the relationship between the price level and real GDP when the economy is at full employment, where all resources are utilized efficiently. Additionally, it does not shift due to temporary changes in aggregate demand, as it reflects the economy's maximum sustainable output based on its resources, technology, and institutions.

Which of the Following Is TRUE About the Long-Run Aggregate