Narrbegin Exhibit 14.1 Aggregate supply curve
-In Exhibit 14.1, there are plenty of idle resources and no upward pressure on prices in:
A) the segment labelled ab.
B) the segment labelled bc.
C) the segment labelled cd.
D) both segment bc and segment cd.

Question

Narrbegin Exhibit 14.1 Aggregate supply curve  
-In Exhibit 14.1, there are plenty of idle resources and no upward pressure on prices in:
A) the segment labelled ab. 
B) the segment labelled bc. 
C) the segment labelled cd. 
D) both segment bc and segment cd.

Quizplus · Accepted Answer

The segment labelled ab represents a situation where there are plenty of idle resources and no upward pressure on prices. This is shown by a flat area of the aggregate supply curve where an increase in aggregate demand will not result in an increase in prices, but only in an increase in output. In segments bc and cd, there is less slack in the economy and an increase in aggregate demand will result in both an increase in output and an increase in prices.

Narrbegin Exhibit 14.1 Aggregate Supply Curve