The LRAS curve is drawn as a vertical line at potential output (Y*)to indicate that

Question

Quizplus · Accepted Answer

The LRAS curve is drawn as a vertical line because it represents the potential output of an economy when all resources are fully utilized. This potential output (Y*) is independent of the price level, meaning that the quantity of goods and services an economy can produce in the long run is not affected by changes in prices. When the actual output (Y) of an economy reaches its potential output (Y*), there is no further upward pressure on prices, and the economy is said to be in long-run equilibrium. Therefore, Y* is independent of the price level, and actual output (Y) equals potential output (Y*) in the long run. Hence, the correct choice is C.

The LRAS Curve Is Drawn as a Vertical Line at Potential