Chapter 18, Problem 2MCQ

To determine

The correct option for the long-run aggregate supply curve

Answer to Problem 2MCQ

From the available options, the correct option is vertical

Explanation of Solution

As long-run aggregate supply curve represents the relationship between the price level and real gross domestic product in the long run period where all price would be considered flexible, therefore, the change in price cannot change the output because as it reflects the employment output. Therefore, the aggregate supply curve in long-run would be vertical.

Whereas, long-run aggregate supply curve cannot be horizontal or fixed because price can change in the long-run. As there is no incentive for businesses to alter their output because resource prices react to changes in the price level. Prices and wages have little long-term impact on the aggregate supply curve.

Here, the correct option is a (vertical).

Economics Concept Introduction

Introduction: An aggregate supply curve represents the relationship between the price level (aggregated) and the quantity supplied (aggregated) in the economy where aggregate supply is the total quantity which is produced and sell by firms at different prices in the market.