When the aggregate supply curve is ________ the price of factors of production is fixed, with little or no upward pressure on price.
A) horizontal
B) vertical
C) upward sloping
D) downward sloping

Question

Quizplus · Accepted Answer

When the aggregate supply curve is horizontal, it indicates that the price of factors of production is fixed, and there is little or no upward pressure on price. This is because at this stage, the economy can increase output without increasing the price level, typically representing a situation of excess capacity or slack in the economy.

When the Aggregate Supply Curve Is ________ the Price of Factors