Final answer:
To draw the long-run aggregate supply curve for potential GDP of $12.5 trillion, place and label a vertical line at the $12.5 trillion mark on the horizontal axis. This curve is vertical because it represents the maximum sustainable output of an economy at full employment.
Step-by-step explanation:
The long-run aggregate supply curve (LRAS) represents the relationship between the price level and the quantity of output that firms are willing to produce when all prices, including nominal wages, are fully flexible. To draw the LRAS curve for an economy where potential GDP is $12.5 trillion, you would place a vertical line at the $12.5 trillion mark on the horizontal axis, which measures real GDP. The vertical axis measures the price level. The LRAS curve is vertical because potential GDP is the maximum sustainable amount of output that the economy can produce, and it is achieved when there is full employment in the economy - meaning that unemployment is at the natural rate and all available inputs (like labor and capital) are being used efficiently.
In the diagram, label the vertical line as 'Potential GDP' or 'Full-Employment GDP' at the $12.5 trillion mark. This vertical line illustrates that at potential GDP, higher prices do not increase output because all resources are already fully employed. Firms have no incentive or ability to increase production, and any attempt to do so would likely lead to inflation rather than increased output.