What does LRAS represent in macroeconomics?

Long Run Aggregate Supply (LRAS) represents the total supply of goods and services that an economy can produce when both labor and capital are fully employed, at a given level of technology. In macroeconomic theory, LRAS is depicted as a vertical line on the aggregate supply and demand graph, indicating that in the long run, the quantity of goods and services produced in an economy is not influenced by the price level.

This vertical nature suggests that any increase in aggregate demand will not increase output in the long run, because the economy is producing at its maximum sustainable capacity. Instead, such an increase is likely to lead to higher price levels, indicating inflationary pressures. LRAS is crucial for understanding the concept of potential GDP, which represents the most efficient level of output achievable without causing inflation, assuming complete resource utilization.

The other options do not capture the essence of LRAS: "Long Run Average Supply" misrepresents the term by implying a focus on average rather than total output, "Low Rate Aggregate Supply" is misleading as it does not refer to a recognized concept within macroeconomic analysis, and "Long Run Asset Supply" confuses the focus on goods and services with financial assets.