When a long-term aggregate supply curve is drawn with real GDP (Y) along the horizontal axis and the price level (P) along the vertical axis, this curve:
A) slopes upward and to the right.
B) slopes downward and to the right.
C) is horizontal.
D) is vertical.

Question

Quizplus · Accepted Answer

A long-term aggregate supply curve is considered to be vertical because in the long run, output is determined by the economy's ability to produce goods and services, which is independent of the price level. Therefore, changes in the price level have no effect on the economy's potential output in the long run.

When a Long-Term Aggregate Supply Curve Is Drawn with Real