The Initial Aggregate Demand Curve Is AD₁ and the Initial

Multiple Choice

The initial aggregate demand curve is AD₁ and the initial aggregate supply curve is AS₁.In the long run, the aggregate supply curve is vertical in the diagram because:

A) nominal wages and other input prices are assumed to be fixed.
B) real output level Q_f is the potential level of output.
C) price level increases produce perfectly offsetting changes in nominal wages and other input prices.
D) higher than expected rates of actual inflation reduce real output only temporarily.