How is the long-run aggregate supply curve illustrated?
A) by an upward-sloping line
B) by a downward-sloping line
C) by a vertical line
D) by a horizontal line

Question

How is the long-run aggregate supply curve illustrated?  
A) by an upward-sloping line 
B) by a downward-sloping line 
C) by a vertical line 
D) by a horizontal line

Quizplus · Accepted Answer

The long-run aggregate supply curve is illustrated by a vertical line because in the long run, the economy's production is not affected by temporary changes in prices or demand shocks. Instead, the level of production is determined by the economy's potential output, which is determined by the availability of factors of production such as capital and labor, and technological progress. Thus, the long-run aggregate supply curve represents the level of potential output in the economy, which does not change in response to changes in prices or demand.

How Is the Long-Run Aggregate Supply Curve Illustrated