If an economy is on the vertical portion of the aggregate supply curve, then it
A) is overheating.
B) is at full employment.
C) has high unemployment.
D) is in a severe recession.

Question

Quizplus · Accepted Answer

Being on the vertical portion of the aggregate supply curve means that the economy has reached its full potential output and is producing at its maximum capacity. This indicates that the economy is at full employment, which is the level of employment where there is no cyclical unemployment (unemployment that occurs due to fluctuations in the business cycle).

If an Economy Is on the Vertical Portion of the Aggregate