The long-run aggregate supply curve is
A)vertical at the natural level of income.
B)horizontal at the natural price level.
C)upward-sloping for all income levels below the natural level of income.
D)downward-sloping for all income levels above the natural level of income.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve is vertical at the natural level of income because it represents a time period in which prices and wages have adjusted to their equilibrium levels, and the economy is producing at its full capacity or natural level of output, independent of the price level.

The Long-Run Aggregate Supply Curve Is