If the AS curve is vertical in the long run, then an increase in aggregate demand will cause a larger effect on the price level than if the AS curve were upward- sloping.

Question

Quizplus · Accepted Answer

When the AS (Aggregate Supply) curve is vertical in the long run, it indicates that the economy is at its full employment level, and output cannot increase further. Therefore, an increase in aggregate demand in this scenario will primarily lead to higher prices (inflation) rather than an increase in output, resulting in a larger effect on the price level compared to when the AS curve is upward-sloping, where increases in demand can still lead to increases in both output and the price level.

If the AS Curve Is Vertical in the Long Run