The aggregate supply curve can be split into two concepts. Identify them.

• A. Long run aggregate supply: Time after max. quantity produced
• B. Short run aggregate supply: Before max quantity
• C. Both long run and short run
• D. None of the above

Answer: (C)

The main idea is that aggregate supply is viewed from two time horizons: short run and long run. In the short run, not all input prices have fully adjusted, so the quantity producers are willing to supply rises when the price level rises, giving an upward-sloping short-run aggregate supply. In the long run, all prices are flexible and resources fully adjust, so output is determined by the economy’s potential—the available capital, labor, and technology—making the long-run aggregate supply vertical at potential output. Because both perspectives exist, the aggregate supply framework includes both long-run and short-run concepts. The other statements describe timing in a way that doesn’t align with these standard definitions.