The long run aggregate supply curve is vertical because
A) the production possibilities curve is vertical.
B) the aggregate demand curve is downward sloping.
C) technology increases at a constant rate.
D) a change in the level of prices will have no effect on real output in the long-run.

Question

Quizplus · Accepted Answer

The long run aggregate supply curve is vertical because in the long-run, changes in the level of prices do not affect real output. This is because in the long-run, all inputs can be adjusted to their optimal level, and any increase in prices is offset by an equal increase in wages and input prices. Therefore, the economy can produce its potential output regardless of the price level.

The Long Run Aggregate Supply Curve Is Vertical Because