The position of the long-run aggregate supply curve corresponds to the economy's:
A) full-employment real GDP.
B) maximum possible level of employment.
C) natural level of personal consumption expenditure.
D) maximum possible level of personal consumption expenditures.
E) maximum possible price level.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve represents the level of output that an economy can produce at full employment, which corresponds to the economy's potential output or potential GDP. This level of output is also known as the natural level of output or full-employment real GDP. Therefore, choice (A) is the correct answer.

The Position of the Long-Run Aggregate Supply Curve Corresponds to the Economy's