The Vertical Long-Run Aggregate Supply (LRAS) Curve

In Classical Economics, the Long-Run Aggregate Supply (LRAS) curve is perfectly vertical at the full employment output level (Y_FE), based on the critical assumption that wages and prices are perfectly flexible; this self-correcting mechanism ensures the economy automatically returns to full employment regardless of price level changes through a six-step process where falling prices initially increase real wages, reduce employment, trigger wage cuts, and restore equilibrium.