If the long-run aggregate supply curve is vertical

Question

Quizplus · Accepted Answer

The vertical long-run aggregate supply curve indicates that the economy's output is determined by factors other than the price level, such as technology and resources. This implies that in the long run, attempts to reduce unemployment below its natural rate through monetary or fiscal policy will only lead to higher inflation, not a permanent decrease in unemployment. Therefore, there cannot be a permanent trade-off between unemployment and inflation.

If the Long-Run Aggregate Supply Curve Is Vertical