Vertical Long-Run Aggregate Supply Curve

Question

The graph above depicts the long-run aggregate supply (LRAS) curve as vertical. What does this vertical LRAS curve indicate?

Accepted Answer

In the long run, the economy’s output is determined by its resources and technology rather than the price level.

Answer

The vertical LRAS indicates that aggregate demand will also be vertical in the long run.

Answer

The long-run aggregate supply is fixed, so the price level cannot change regardless of demand fluctuations.

Answer

The economy is operating at full capacity and cannot produce more output even when demand increases.