If the economy's AS curve is completely horizontal,the multiplier in the AD/AS model is
A)infinitely large.
B)equal to the simple multiplier.
C)smaller than the simple multiplier.
D)is zero.
E)negative.

Question

Quizplus · Accepted Answer

When the AS curve is horizontal, it indicates that the economy is operating below full capacity, and any increase in aggregate demand will lead to an increase in output without affecting the price level. Therefore, the multiplier effect is equal to the simple multiplier, as there are no price level changes to dampen the impact of increased spending.

If the Economy's AS Curve Is Completely Horizontal,the Multiplier in the AD/AS