PRC-3 · Chapter 13 · Question 20 of 50
According to Keynesian theory, the Long-Run Aggregate Supply (LRAS) curve eventually becomes perfectly vertical. What economic state does this vertical section represent?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) The absolute physical limit of full employment capacity
Explanation
The vertical portion of the LRAS curve indicates that the economy has reached full employment; all resources are fully utilized, and physical output cannot increase any further regardless of price level.
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