The short-run aggregate supply curve intersects the long-run aggregate supply curve at
A) a constant price level.
B) the potential level of real output.
C) the equilibrium level of aggregate demand.
D) the point where real GDP equals nominal GDP.

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve captures the relationship between the price level and the level of output in the short-run, while the long-run aggregate supply curve represents the maximum potential level of output that can be produced without inflationary pressures. Therefore, the point at which these two curves intersect represents the potential level of real output in the economy in the long-run, with a constant price level.

The Short-Run Aggregate Supply Curve Intersects the Long-Run Aggregate Supply