In the AD-AS model, when the short-run aggregate supply (SAS) curve is horizontal, it means that
A) in the short run, aggregate supply is equal to the aggregate demand.
B) in the short run, producers produce whatever quantity is demanded.
C) in the short run, output is fixed.
D) in the short run, price will rise as output increases.

Question

Quizplus · Accepted Answer

When the SAS curve is horizontal, it means that producers are able to increase their output without an increase in costs. This results in a situation where producers can produce whatever quantity is demanded, leading to equilibrium in the market where aggregate supply is equal to aggregate demand.

In the AD-AS Model, When the Short-Run Aggregate Supply (SAS)