Question

which of the following statements is true? a. laissez-faire is a government policy of raising aggregate demand in order to eliminate a recessionary gap. b. if the economy is self-regulating, it is always in long-run equilibrium. c. the long-run aggregate supply (lras) curve shows the real gdp the economy is prepared to supply at different price levels, assuming wage rates and all other resource prices have fully adjusted to eliminate a recessionary or inflationary gap. d. an economy can operate beyond its physical ppf, but not beyond its institutional ppf.

Answer 1

The long-run aggregate supply (LRAS) curve shows the real GDP the economy is prepared to supply at different price levels, assuming wage rates and all other resource prices have fully adjusted to eliminate a recessionary or inflationary gap.

Step-by-step explanation:

The correct statement is:

c. The long-run aggregate supply (LRAS) curve shows the real GDP the economy is prepared to supply at different price levels, assuming wage rates and all other resource prices have fully adjusted to eliminate a recessionary or inflationary gap.

The long-run aggregate supply (LRAS) curve represents the economy's full potential output and is vertical at the potential GDP level. It shows the maximum amount of real GDP that can be produced in the long run given current technology, resources, and institutions. The LRAS curve assumes that all resource prices, including wages, have fully adjusted to eliminate any recessionary or inflationary gaps.