Which of the following is true of a long-run aggregate supply curve?
A)It is downward sloping when prices are falling and upward sloping when prices are rising.
B)It is upward sloping due to the effects of changes in the price level on production.
C)It is the same as the short-run aggregate supply curve at full-employment equilibrium.
D)It is vertical at the full employment level of output.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve is vertical at the full employment level of output because in the long run, all factors of production are variable, and firms can adjust their production levels to meet changes in demand without affecting the overall price level. This means that the level of output is determined by the economy's productive capacity, which is independent of the price level.

Which of the Following Is True of a Long-Run Aggregate