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

Question

Quizplus · Accepted Answer

When the AS curve is vertical, it means that the economy's production capacity is fixed, meaning that any increase in aggregate demand will only lead to a rise in prices and not output. In this scenario, the multiplier in the AD/AS model is zero since there will be no change in real output.

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