Which of the following is true? Select one: a. If the economy is close to capacity, with resources almost fully employed, the AS curve will be flat b. If the economy is in a recession, with idle resources, the AS curve will be steep c. If the economy is at full capacity, then the AS curve will be vertical. d. None of the above

Question

Business

Deon Pena

7 February, 02:30

Which of the following is true? Select one: a. If the economy is close to capacity, with resources almost fully employed, the AS curve will be flat b. If the economy is in a recession, with idle resources, the AS curve will be steep c. If the economy is at full capacity, then the AS curve will be vertical. d. None of the above

+4

Answers (1)

Know the Answer?

Jazlyn Anthony · Answer 1

Correct option is C.

If the economy is at full capacity, then the AS curve will be vertical

Explanation:

The long-run aggregate supply curve is perfectly vertical, which reflects economists' belief that the changes in aggregate demand only cause a temporary change in an economy's total output. For the short-run aggregate supply, the quantity supplied increases as the price rises.

The full capacity AS curve is a long-run AS curved and it is vertical as the potential output level is denoted by it with the fully employed resources.