Question

The belief that changes in price level have no effect on the long-run quantity of final goods and services the economy can produce is illustrated by the A) upward-sloping aggregate demand curve. B) downward-sloping aggregate supply curve. C) long-run vertical aggregate supply curve. D) short-run upward-sloping aggregate supply curve.

Answer 1

Answer: C) long-run vertical aggregate supply curve.

Explanation: Downward and Upward sloping demand curves will show the dropping or rising price level which will affect the quantity of output demand.

While long-run and short-run aggregate supply curves show how the price level relates to the quantity of production of goods and services. In short-run upward-sloping aggregate supply curve it shows the belief that “the quantity supplied increases when the price rises.

While the long-run vertical aggregate supply curve shows the beliefs of economists that in long-run is only the labor, capital and technology that can affect the quantity of final goods and services that one economy can produce.