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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Definitions:

Understanding

The ability to grasp the meaning, significance, or nature of something, often involving comprehension of concepts and relationships.

Sisters

Female siblings who share one or both parents in common.

Sensorimotor Stage

The first stage of Piaget’s theory of cognitive development, where infants learn about the world primarily through their sensory impressions and motor activities.

Preoperational

A stage in Piaget's theory of cognitive development where children, typically aged 2 to 7, are capable of symbolic thought but not yet of logical operations.