If wages and other costs fully adjust to changes in prices in the long run, the long-run aggregate supply curve is
A) vertical.
B) horizontal.
C) positively sloped.
D) negatively sloped.

Question

Quizplus · Accepted Answer

If wages and other costs fully adjust to changes in prices in the long run, it means that all factors of production will adjust and the economy will be in a state of equilibrium. In this case, the long-run aggregate supply curve will be vertical, indicating that changes in aggregate demand will only result in changes in price level, not output.

If Wages and Other Costs Fully Adjust to Changes in Prices