If long-run aggregate supply represents the economy's potential output, what condition must be met in the long-run?

The condition that must be met in the long run for long-run aggregate supply (LRAS) to accurately represent the economy's potential output is the achievement of full employment of resources. In economic terms, this means that all factors of production (labor, capital, land, and entrepreneurship) are being utilized efficiently and sustainably.

When an economy is operating at full employment, it indicates that it is maximizing its production capabilities, utilizing its available resources effectively. This does not imply that every individual is employed, as structural and frictional unemployment may still exist; rather, it highlights that the economy is functioning at a level where resources are allocated in a way that does not cause inflationary pressure or underutilization.

In contrast, conditions such as rising inflation, over-utilization of resources, or a situation where aggregate demand exceeds supply would indicate that the economy may be operating beyond its long-run potential, leading to inefficiencies or overheating. Thus, achieving full employment of resources is essential for the economy to reach its potential output as represented by the long-run aggregate supply curve.