A rise in the price level in an economy
A)shifts its long-run aggregate supply curve to the right.
B)shifts its long-run aggregate supply curve to the left.
C)does not have any effect on its long-run aggregate supply.
D)does not have any effect on its aggregate demand.

Question

Quizplus · Accepted Answer

The long-run aggregate supply (LRAS) curve represents the total output of goods and services that an economy can produce when both capital and labor are fully employed. It is vertical because, in the long run, the quantity of output is determined by the availability of resources (labor, capital, land) and technology, not by the price level. Therefore, a rise in the price level does not affect the long-run aggregate supply.

A Rise in the Price Level in an Economy