Question

Briefly explain the reason for the near-vertical shape of the SRAS curve on its far right.

Short answer

When all resources are fully utilized, SRAS is vertical, indicating that the output has attained its maximum capacity.

Step-by-step solution

Concept introduction

The SRAS curve depicts the relationship between pricing and aggregate output.

Explanation

In the long run, SRAS approaches verticality because all of the economy's resources are fully utilized. The quantity of production cannot be increased more as all resources are fully utilized.

The economy is unable to produce any additional output due to a lack of resources. The resources have been fully exploited, and the output has reached its maximum potential. Even if prices rise, there is no way to boost output; only inflation is possible.