Long-run aggregate supply reflects
A) total production in the economy at full employment.
B) total spending in the economy at full employment.
C) both production and spending in the economy.
D) only foreign production from U.S. subsidiaries.

Question

Quizplus · Accepted Answer

Long-run aggregate supply (LRAS) reflects the potential output of an economy at full employment and with all its resources used efficiently. LRAS is independent of the price level, as it only considers the availability and productivity of factors of production, such as land, labor, and capital. Therefore, LRAS represents the maximum sustainable production level of an economy in the long run, regardless of the level of spending or foreign production.

Long-Run Aggregate Supply Reflects