The Long-Run Aggregate Supply Curve Is Vertical at $16 Trillion

question 402

Multiple Choice

The long-run aggregate supply curve is vertical at $16 trillion but the short-run aggregate supply curve intersects the aggregate demand curve at $17 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) the price level is too high. The long-run equilibrium will occur with a lower price level.
• C) adjustments will occur so that the long-run aggregate supply equals $17 trillion.
• D) adjustments will occur so that the short-run aggregate supply eventually intersects the aggregate demand curve at $16 trillion.

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