In the horizontal segment of the aggregate supply curve, when GDP:
A) increases, the price level rises.
B) decreases, the price level falls.
C) increases, the price level does not change.
D) increases, the price level falls.

Question

Quizplus · Accepted Answer

In the horizontal segment of the aggregate supply curve, the economy is producing at its full potential and any increase in GDP is met with an equal increase in production. Therefore, there is no increase in the price level.

In the Horizontal Segment of the Aggregate Supply Curve, When