Which of the following is consistent with the general consensus about the shape of the short-run aggregate supply curve?
A)Horizontal until full employment is reached,and then vertical.
B)Horizontal,then upward-sloping,and ultimately vertical.
C)Horizontal at all production levels.
D)Vertical.

Question

Quizplus · Accepted Answer

The general consensus about the shape of the short-run aggregate supply curve is that it is horizontal at low levels of output, then upward sloping, and ultimately vertical at the level of output corresponding to full employment. This is because at low levels of output, there are unemployed resources that can be readily utilized without putting upward pressure on wages and prices. However, as output approaches the full-employment level, resource utilization becomes more difficult, and wages and prices begin to rise. At the level of full employment, the economy is producing at its potential, and any attempt to increase output beyond this level will result in higher costs as resources become scarce.

Which of the Following Is Consistent with the General Consensus