11.5 The Long-Run AS Curve
Refer to the information provided in Figure 11.7 below to answer the questions that follow. Figure 11.7
-Refer to Figure 11.7. $700 million is the level of aggregate output that can be sustained in the long run
A) without inflation.
B) only with inflation.
C) only with deflation.
D) only with unemployment.

Question

11.5 The Long-Run AS Curve
Refer to the information provided in Figure 11.7 below to answer the questions that follow.  Figure 11.7
-Refer to Figure 11.7. $700 million is the level of aggregate output that can be sustained in the long run
A) without inflation. 
B) only with inflation. 
C) only with deflation. 
D) only with unemployment.

Quizplus · Accepted Answer

The point where the long-run AS curve intersects the vertical axis (potential GDP) represents the maximum sustainable level of output in the economy without generating inflationary pressure. In this case, $700 million is the level of aggregate output that can be sustained in the long run without inflation. Therefore, the correct answer is A.

11.5 the Long-Run AS Curve