Final answer:
The long-run aggregate supply curve is vertically positioned at the potential GDP level and is determined by available labor and capital. It reflects the economy's production capabilities based on factors like physical and human capital, as well as technological progress. Changes in aggregate demand do not alter output but affect the price level, while the natural rate of unemployment is fixed.
Step-by-step explanation:
The position of the long-run aggregate supply (LRAS) curve is determined by factors that affect a nation's potential output in the long run. The correct answer is (a) Available labor and capital, as these are the primary determinants of potential GDP, and thus, the LRAS. Neoclassical economists assert that the LRAS curve is vertical at the level of potential GDP, indicating that shifts in aggregate demand affect only the price level and not the level of output which is fixed by the economy's production capabilities over time. This capacity is influenced by the quantity and quality of a nation's physical capital, human capital, and technological advancements. As these factors improve, they lead to economic growth and can shift the vertical LRAS curve gradually to the right.
The vertical Phillips curve further illustrates this concept, showing that when the natural rate of unemployment is fixed, such as at 5%, the unemployment rate does not change with varying price levels. Therefore, changes in government policies, consumer demand, or short-term economic fluctuations, which do not alter the factors of production, will not affect the position of the LRAS curve.