The vertical curve through the natural rate of output to which the economy will return in the long run, regardless of the price level, is called the
A)long-run aggregate supply curve.
B)short-run aggregate supply curve.
C)aggregate supply curve.
D)aggregate demand curve.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve represents the level of output that the economy will produce in the long run, and is independent of the price level. It is a vertical line that intersects the natural rate of output, which is the level of output that can be sustained in the long run without causing inflationary pressures. The short-run aggregate supply curve, in contrast, is upward sloping and shows how output changes in response to changes in the price level in the short run. The aggregate demand curve shows the relationship between the price level and the level of aggregate expenditure in the economy.

The Vertical Curve Through the Natural Rate of Output to Which