When the AS curve is vertical at the full-employment GDP, the effect/s of a change in AD:
A) is a change in the price level.
B) are changes in the demand and the price levels.
C) is a change in the output level.
D) is a change in the quality.

Question

Quizplus · Accepted Answer

When the AS curve is vertical at the full-employment GDP, it means that the economy has reached its production limit, and any increase in aggregate demand can only result in higher prices, and not increased output. Therefore, the only effect of a change in AD in this situation is a change in the price level.

When the AS Curve Is Vertical at the Full-Employment GDP