Changes in the price level
A)increase the level of aggregate supply in the long run.
B)decrease the level of aggregate supply in the long run.
C)do not affect the level of aggregate supply in the long run.
D)increase the level of aggregate supply in the long run only at very high levels of output.

Question

Quizplus · Accepted Answer

Changes in the price level do not affect the level of aggregate supply in the long run. In the long run, the level of aggregate supply is determined by the availability of factors of production such as labor, capital, and technology. Although changes in the price level can affect the short-run aggregate supply, the long-run aggregate supply curve is vertical, indicating that changes in the price level do not affect the quantity of goods and services that can be produced in the long run.

Changes in the Price Level