Question

The long-run aggregate supply curve represents the level of output possible if the economy: Multiple Choice...

The long-run aggregate supply curve represents the level of output possible if the economy:

Multiple Choice

  • is operating at full capacity.

  • has a zero inflation rate.

  • is operating at an unemployment rate of zero.

  • has no structural unemployment.

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Answer #2

Answer Long run aggregate supply curve reveals that level of output possible , if an economy is operating at full capacity . When nation is producing at its full potential capacity , rate of unemployment = natural rate of unemployment, Secondly , at full employment in long time period automatic adjustment in interest rate, wages can attain. Secondly in the long time period, there can be change in prices which can make changes in output but by automatic adjustment, output can be in equilibrium again and possible only at full employment.

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