Figure 12.1 Aggregate Supply and Aggregate Demand -Refer to Figure 12.1. The shape of the aggregate supply curve AS₀ shows that the economy is initially operating in a range at which the economy is A) in a severe recession B) about to collapse C) approaching full employment D) experiencing high inflation

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The shape of the aggregate supply curve AS₀, which typically becomes steeper as it approaches its vertical portion, indicates that the economy is approaching full employment. At this stage, increases in aggregate demand lead to higher prices rather than large increases in output.