The long-run aggregate supply when resources are fully employed
A) has no relationship with the production possibilities curve.
B) will always be associated with a point outside the production possibilities curve.
C) will always be associated with a point on the production possibilities curve.
D) is determined by demand.

Question

Quizplus · Accepted Answer

The long-run aggregate supply when resources are fully employed will always be associated with a point on the production possibilities curve. This is because the production possibilities curve shows the maximum output that can be produced with the given resources and technology, and when resources are fully employed, the economy is producing at its maximum capacity. The long-run aggregate supply shows the potential output of an economy when all resources are fully employed and therefore represents a point on the production possibilities curve.

The Long-Run Aggregate Supply When Resources Are Fully Employed