When the economy is producing ________, the aggregate supply curve becomes vertical.
A) below full capacity
B) beyond full capacity
C) at full capacity
D) at negative capacity

Question

Quizplus · Accepted Answer

When the economy is producing at full capacity, the aggregate supply curve becomes vertical because any increase in production beyond the full capacity would require an increase in factors of production such as labor and capital, which are limited resources. Therefore, the economy cannot produce beyond full capacity in the short run, resulting in a vertical AS curve.

When the Economy Is Producing ________, the Aggregate Supply Curve