Question

Which statement is NOT true regarding the long-run aggregate

supply (LRAS) curve?
1. The LRAS curve assumes that inflationary pressures are higher
than normal.
2. The LRAS curve assumes that further increases in output will
lead to higher prices.
3. The LRAS curve is vertical.
4. The LRAS curve assumes that prices, wages, and interest rates
are flexible.

Answer 1

The correct answer is option 2)The LRAS curve assumes that further increases in output will lead to higher prices.

Step-by-step explanation:

The statement that is NOT true regarding the long-run aggregate supply (LRAS) curve is 2. The LRAS curve assumes that further increases in output will lead to higher prices.

The LRAS curve is actually vertical, which means that it assumes that changes in aggregate demand only lead to changes in the price level, not the level of output. In the long run, the LRAS curve is determined by factors such as the quantity and quality of resources and technology, rather than changes in output.