The Long- Run Aggregate Supply Curve Is Vertical at $12

question 340

Multiple Choice

The long- run aggregate supply curve is vertical at $12 trillion but the short- run aggregate supply curve intersects the aggregate demand curve at $13 trillion. We know that

• A) the economy is producing below full employment in the short run, and will adjust by hiring more workers, thus decreasing unemployment.
• B) adjustments will occur so that the long- run aggregate supply equals $13 trillion.
• C) adjustments will occur so that the short- run aggregate supply eventually intersects the aggregate demand curve at $12 trillion.
• D) the price level is too high. The long- run equilibrium will occur with a lower price level.

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