Refer to the information provided in Figure 26.1 below to answer the question(s) that follow. Figure 26.1
-Refer to Figure 26.1. At aggregate output levels below $500 billion, this economy is most likely experiencing
A) rapid increases in the growth rate of the money supply.
B) a boom.
C) excess demand.
D) excess capacity.

Question

Refer to the information provided in Figure 26.1 below to answer the question(s) that follow.  Figure 26.1
-Refer to Figure 26.1. At aggregate output levels below $500 billion, this economy is most likely experiencing
A) rapid increases in the growth rate of the money supply. 
B) a boom. 
C) excess demand. 
D) excess capacity.

Quizplus · Accepted Answer

At aggregate output levels below $500 billion, the economy is experiencing excess capacity, as the vertical portion of the aggregate supply curve indicates that there is a significant amount of unused resources in the economy. This indicates that firms have the ability to produce more output if there is sufficient demand, without necessarily needing to hire more workers or purchase additional capital, and that price levels will remain relatively stable.

Refer to the Information Provided in Figure 26