If full-employment GDP is equal to $4.2 trillion,what does the long-run aggregate supply curve look like?
A)It is a horizontal line at $4.2 trillion of GDP.
B)It is a vertical line at a level of GDP below $4.2 trillion.
C)It is a vertical line at $4.2 trillion of GDP.
D)It is a vertical line at a level of GDP above $4.2 trillion.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve represents the level of output that an economy can produce at full employment. Since the full-employment GDP is equal to $4.2 trillion, the long-run aggregate supply curve will be a vertical line at the level of $4.2 trillion of GDP. This means that, in the long run, aggregate supply is fixed and independent of changes in the price level, which is characteristic of a vertical aggregate supply curve.

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