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14 May, 03:16

The long-run aggregate supply curve

1. is very sensitive to changes in the price level.

2. shows that at higher prices, potential real Gross Domestic Product (GDP) increases.

3. shows that long-run aggregate supply equals potential real Gross Domestic Product (GDP).

4. slopes up and to the right.

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Answers (1)
  1. 14 May, 03:45
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    Option 1 - The long-run aggregate supply curve is very sensitive to changes in the price level.

    Explanation:

    The long-run aggregate supply curve, LRAS, is a curve that reveals the relationship between the price level and real GDP that would be supplied if all prices, including nominal wages, were fully flexible; price can change along the LRAS, but the output cannot because output reflects the full-employment output.

    Therefore, the long-run aggregate supply curve is very sensitive to changes in the price level.
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