A horizontal aggregate supply curve below the level of full employment is most consistent with which of the following views of the economy?
A)Keynesian.
B)Monetarist.
C)Supply-side.

Question

Quizplus · Accepted Answer

A horizontal aggregate supply curve below the level of full employment suggests that there is excess capacity in the economy and that monetary policy alone may not be sufficient to stimulate aggregate demand and close the output gap. This view is consistent with Keynesian economics, which emphasizes the role of government intervention to stabilize the economy and promote full employment. Monetarists, on the other hand, emphasize the importance of controlling the money supply to achieve price stability, while supply-siders focus on reducing taxes and regulations to promote economic growth.

A Horizontal Aggregate Supply Curve Below the Level of Full