If the aggregate supply curve is vertical in the long-run, then neither monetary nor fiscal policy will affect aggregate output in the long-run.

Question

Quizplus · Accepted Answer

If the aggregate supply curve is vertical in the long-run, it means that the economy is producing at its full potential and any attempts to stimulate output through monetary or fiscal policy will only result in increasing prices without changing output. In the long-run, the equilibrium point on the aggregate demand curve will correspond to the full employment output level determined by the vertical aggregate supply curve.

If the Aggregate Supply Curve Is Vertical in the Long-Run