The aggregate supply curve relating the price level to real GDP has three distinguishing segments.Which one of the following indicates the segments?
A) The horizontal segment reflects the increasing pressure on the price level as firms bid for resources. The upward-sloping segment reflects the availability of unused resources. The vertical segment reflects the full employment of all resources.
B) The horizontal segment reflects the availability of unused resources. The upward-sloping segment reflects the full employment of all resources. The vertical segment reflects the increasing pressure on the price level as firms bid for resources.
C) The horizontal segment reflects the full employment of all resources. The upward-sloping segment reflects the increasing pressure on the price level as firms bid for resources. The vertical segment reflects the availability of unused resources.
D) The horizontal segment reflects the availability of unused resources. The downward-sloping segment reflects decreasing pressure on the price level as firms bid for resources. The vertical segment reflects the full employment of all resources.
E) The horizontal segment reflects the availability of unused resources. The upward-sloping segment reflects increasing pressure on the price level as firms bid for resources. The vertical segment reflects the full employment of all resources.

Question

Quizplus · Accepted Answer

The horizontal segment of the aggregate supply curve indicates the availability of unused resources, as firms can increase production without affecting the price level. The upward-sloping segment reflects the increasing pressure on the price level as firms bid for resources, as these resources become scarcer due to increased production. Finally, the vertical segment reflects the full employment of all resources, as any further increase in production would require an increase in prices.

The Aggregate Supply Curve Relating the Price Level to Real