If the Long-Run Aggregate Supply Curve Is Vertical, Then Changes

question 109

Multiple Choice

If the long-run aggregate supply curve is vertical, then changes in aggregate demand affect:

• A) neither prices nor level of output.
• B) both prices and level of output.
• C) level of output but not prices.
• D) prices but not level of output.

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Definitions:

Government Intervention

Actions taken by a government to affect the economy, which can include regulations, subsidies, tariffs, and monetary policies.

Expected Rate Of Profit

The anticipated return on an investment, taking into account the risk and time value of money.

Classical Theory

Refers to an economic theory that asserts that the economy is self-regulating, markets are best left alone without government intervention, and supply creates its own demand.

Interest Rate

The fee that a lender imposes on a borrower for the usage of assets, represented as a proportion of the principal amount.