If there was no profit effect or misperception effect in the short run,how would the SRAS and LRAS curve be drawn?
A)The SRAS and the LRAS would both be vertical.
B)The SRAS would be vertical and the LRAS would be upward sloping.
C)The SRAS would be upward sloping and the LRAS would be vertical.
D)The SRAS and LRAS would both be upward sloping.

Question

Quizplus · Accepted Answer

If there are no profit effect or misperception effect in the short run, both the SRAS and LRAS would be vertical. This is because changes in the price level would not affect the quantity of output supplied in the short run, and in the long run, the economy would have adjusted to full employment and potential output level, which would be independent of the price level.

If There Was No Profit Effect or Misperception Effect in the Short