The distinction between the short-run and long-run aggregate supply curve is necessary because in the long run:
A)technology is fixed, but in the short run it changes.
B)changes in the price level do not affect the level of real GDP but do in the short run.
C)the aggregate supply curve is horizontal, but in the short run it is upward sloping.
D)the price level is constant, but in the short run it fluctuates.

Question

Quizplus · Accepted Answer

In the long run, changes in the price level do not affect the level of real GDP as all input prices and technology adjust to changes in the price level. However, in the short run, changes in the price level can lead to changes in the level of real GDP due to sticky wages and prices. Therefore, the distinction between the short-run and long-run aggregate supply curve is necessary to account for these differences. Choices A, C, and D are incorrect as they do not accurately describe the differences between the short-run and long-run aggregate supply curve.

The Distinction Between the Short-Run and Long-Run Aggregate Supply Curve