PRC-3 · Chapter 13 · Question 39 of 50
According to Keynesian macroeconomic theory, when an economy reaches its absolute physical limit of full employment, its Long-Run Aggregate Supply (LRAS) curve becomes:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) A perfectly vertical line
Explanation
At full employment, all resources are utilized. Output cannot physically increase any further regardless of how high the price level goes, resulting in a vertical LRAS curve.
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