Question : The aggregate supply, in the long run, is primarily determined by:
Option 1: Resource price
Option 2: Technology
Option 3: Government Policies
Option 4: Interest rates
Correct Answer:
Resource price
Solution : The correct answer is (a) Resource prices.
While technology does play a significant role in influencing long-run aggregate supply, it is the availability and cost of resources, including labor, capital, land, and raw materials, that ultimately shape an economy's production capacity in the long term.
Therefore, in the long run, changes in resource prices, such as fluctuations in wages, energy costs, or the prices of raw materials, have a more significant influence on the aggregate supply curve. Government policies and interest rates can also impact resource availability and costs, but their effects are mediated through their impact on resource markets.
