Consider the basic AD/AS model.If firms' unit costs remained constant as firms increased their output levels,this would lead to a
A)vertical AD curve.
B)horizontal AD curve.
C)vertical AS curve.
D)horizontal AS curve.
E)horizontal AE curve.

Question

Quizplus · Accepted Answer

If firms' unit costs remained constant as firms increased their output levels, it means that the short-run aggregate supply (AS) curve would be horizontal, as firms would be able to produce any level of output without facing rising costs. This would also mean that the equilibrium level of output would be solely determined by aggregate demand (AD), leading to a horizontal AD curve as well.

Consider the Basic AD/AS Model