The long-run aggregate supply curve is represented by a vertical line at the Solow growth rate because:
A) growth depends on the rate of inflation in the long run.
B) there is an underlying assumption of long-run money neutrality.
C) growth is affected by changes in the money supply in the long run.
D) growth is not affected by the factors of production.

Question

Quizplus · Accepted Answer

The Solow growth rate is the long-run rate of economic growth determined by growth in factor inputs (capital and labor) and technological progress. The long-run aggregate supply curve is a vertical line at this rate because it assumes underlying long-run money neutrality, meaning changes in the money supply do not affect the Solow growth rate. Therefore, choices A, C, and D are incorrect.

The Long-Run Aggregate Supply Curve Is Represented by a Vertical