The longrun aggregate supply curve is A a horizontal line t

The long-run aggregate supply curve is ( A, a horizontal line through the current level of output. O B. a vertical line through the current level of output. C. a vertical line through the natural rate level of output. O D. a vertical line through the non-inflationary rate of output.

Solution

Answer is option c)

It is perfectly vertical in classical model because it is the level of output an economy can produce when its physical capital and labor are working at full capacity which is called natural level of output. So, when demand increases at this full capacity, since the economy cannot produce more goods and services, prices, and not output, will rise.