Why is the long-run aggregate supply curve depicted as vertical?

• A. Because the price level determines output in the long run.
• B. Because the central bank sets a long-run target for output.
• C. Because demand determines long-run output.
• D. Because output is determined by resources and technology, not the price level.

Answer: (D)

In the long run, output is determined by the economy’s productive capacity—the amount of labor, capital, land, and technology available. Prices and wages are free to adjust, so a higher or lower overall price level doesn’t change how much the economy can produce. That’s why the long-run aggregate supply curve is vertical: output is fixed by real factors, not by the price level. In the short run, prices and wages can be sticky, so output can deviate from potential, but over time those prices adjust and output returns to its capacity level. The other statements confuse what sets long-run output (real resources and technology) with the role of demand or policy, which mainly affect the short-run fluctuations.