Final answer:
In the long run, the economy's output is determined by the vertical long-run aggregate supply curve at the potential GDP level; unemployment is at its natural rate, and GDP cannot be sustained above potential GDP.
Step-by-step explanation:
The question pertains to the behavior of the economy in the long run, focusing on the concepts of the long-run aggregate supply (LRAS), short-run aggregate supply (SRAS), and unemployment rates within the context of macroeconomic theory. In the long run, the long-run aggregate supply curve (LRAS) is vertical at the level of potential GDP, meaning that real GDP in the economy is determined by the LRAS and does not change with the price level.
Option (a) suggests that LRAS and SRAS lie on the same line, which is incorrect because SRAS can shift due to short-term fluctuations, while LRAS remains vertical at the level of potential GDP. Option (b) about the inflation rate is irrelevant to the theoretical properties of LRAS. Option (c) is accurate as in the long run, unemployment is at its natural rate, which is supported by neoclassical economists who argue that the economy tends towards a natural level of output and unemployment over time. Option (d), which posits that GDP is greater than potential GDP, is not sustainable in the long run as the economy will adjust back to potential GDP due to wage and price changes.
In the long run, if unemployment rates are unsustainably low, eager employers bid up wages, which shifts the SRAS to the left. This scenario might temporarily increase prices but does not change the long-run equilibrium output which remains at the potential GDP level, exemplified by the vertical LRAS curve.