Which of the following is consistent with the general consensus about the shape of the short-run aggregate supply curve?
A)Horizontal until full employment is reached,and then vertical.
B)Horizontal,then upward-sloping,and ultimately vertical.
C)Horizontal at all production levels.

Question

Quizplus · Accepted Answer

The general consensus is that the short-run aggregate supply curve is initially horizontal, reflecting the idea that firms can increase production without raising prices due to underutilized resources. However, as the economy approaches full employment, resources become scarce and firms must start bidding up wages and prices to attract labor and other inputs. This results in an upward-sloping portion of the aggregate supply curve. Finally, at full employment, the curve becomes vertical as all resources are fully utilized and any further increases in production require higher prices.

Which of the Following Is Consistent with the General Consensus