The long-run aggregate supply curve shows the relationship between
A)short-run aggregate supply and short-run aggregate demand.
B)the price level and quantity of real GDP supplied.
C)the real interest rate and the nominal interest rate.
D)the quantity of real GDP supplied and the quantity of nominal GDP supplied.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve shows the relationship between the price level and the quantity of real GDP supplied, holding all factors of production and technology constant. In the long run, the economy's potential output is determined by its factors of production and technology, and changes in the price level do not affect the level of potential output. Therefore, the long-run aggregate supply curve is a vertical line at the economy's potential output level.

The Long-Run Aggregate Supply Curve Shows the Relationship Between