The aggregate supply curve will be vertical when:
A) output can be increased without an increase in the price level.
B) the economy is operating at full-employment capacity.
C) output and price level rise together.
D) the aggregate demand curve is shifting to the left.
E) aggregate demand is absent.

Question

Quizplus · Accepted Answer

When the economy is operating at full-employment capacity, the aggregate supply curve will become vertical. This is because the economy cannot produce more without causing inflation and an increase in the price level. The vertical curve signifies that the economy has reached its full potential output, and any increase in demand will only lead to a rise in prices, not output.

The Aggregate Supply Curve Will Be Vertical When