Which of the following statements about the long-run aggregate supply curve is the most accurate?
A)It is upward sloping.
B)The level of real GDP supplied changes as input prices change.
C)The level of real GDP supplied changes with the levels of capital, land, labour, and technology available to the economy.
D)The LRAS shifts when the SRAS shifts.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve represents the capacity of an economy to produce goods and services in the long run, given all inputs such as capital, land, labor, and technology. Therefore, the level of real GDP supplied changes with the levels of these inputs available to the economy. The LRAS is not affected by changes in input prices or temporary shocks, so it is a vertical line in the long run. The LRAS is not directly affected by shifts in the SRAS, but a persistent shift in the SRAS can lead to a shift in the LRAS over time.

Which of the Following Statements About the Long-Run Aggregate Supply