Why is the long-run aggregate supply curve considered vertical?

The long-run aggregate supply curve is viewed as vertical because it signifies that, in the long run, the output of an economy is determined by its resources, technology, and productivity, rather than the price level. This reflects the fact that, over time, an economy can adjust to changes in demand and prices, reaching a level of output that is governed by the availability of labor, capital, land, and the state of technology.

When the economy operates at full employment, any changes in aggregate demand will not affect the long-run output. Instead, they may only influence the price level. Thus, this vertical characteristic denotes that the long-run aggregate supply is fixed in terms of quantity produced once the economy is at its potential output, independent of price fluctuations.

The other options do not capture the core reason for the vertical shape of the long-run aggregate supply curve. Output is not solely dictated by price levels, consumer demand fluctuates in the short run rather than impacting long-run capacity, and government spending efficiency does not define the economy's total productive capacity. Hence, the correct understanding centers on technology and production factors as the determinants of the economy's long-term output capacity.