Long‑run aggregate supply has this characteristic because the federal government makes up the difference between GDP and potential output.

a. the ability of the economy to produce determines long‑run output. b. this ability is independent of price levels.

c. inflation adjusts the value of real GDP.

d. consumers adjust their decisions based on aggregate price.

Question

Business

Yesenia Keith

6 May, 05:18

Long‑run aggregate supply has this characteristic because the federal government makes up the difference between GDP and potential output.

a. the ability of the economy to produce determines long‑run output. b. this ability is independent of price levels.

c. inflation adjusts the value of real GDP.

d. consumers adjust their decisions based on aggregate price.

+3

Answers (1)

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Sam Wilkerson · Answer 1

Answer: a. the ability of the economy to produce determines long‑run output this ability is independent of price levels.

Explanation:

The should be, 'Long‑run aggregate supply has this characteristic because' with the rest of the sentence being ' the federal government makes up the difference between GDP and potential output ' making up one of the options.

I assume the Characteristic in question is the Vertical nature of the Long run supply curve.

The Long Run Supply Curve has the characteristic of being Vertical in shape because Economists believe that in the long term, the economy is already producing at an optimal level and that Aggregate Demand cannot affect Aggregate Supply for an extended period of time therefore this level is independent of Price changes. It is rather more affected by factors such as capital, technology and labor.