An increase in aggregate demand will result in the greatest increase in the price level when the aggregate supply curve is
A) horizontal
B) downward sloping
C) upward sloping
D) vertical

Question

Quizplus · Accepted Answer

When the aggregate supply curve is vertical, it indicates that the economy is at full capacity. Any increase in aggregate demand at this point will not result in higher output but will lead to a higher price level, as producers cannot increase production to meet the higher demand.

An Increase in Aggregate Demand Will Result in the Greatest