The long-run aggregate supply curve is vertical at the level of output:
A) determined by aggregate demand.
B) at which unemployment is at its natural rate.
C) at which the inflation rate is zero.
D) at a predetermined price level.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve is vertical at the level of output where unemployment is at its natural rate. This means that the economy is producing at its potential and any increase in aggregate demand will only lead to an increase in prices and not output. The long-run aggregate supply curve is not determined by aggregate demand, a predetermined price level, or the inflation rate being zero.

The Long-Run Aggregate Supply Curve Is Vertical at the Level