Exhibit 14-1 Aggregate supply curve

In Exhibit 14-1, there are plenty of idle resources and no upward pressure on prices in:

Question

Exhibit 14-1 Aggregate supply curve

In Exhibit 14-1, there are plenty of idle resources and no upward pressure on prices in:

Quizplus · Accepted Answer

In the segment labeled ab, there are plenty of idle resources and no upward pressure on prices as the aggregate supply curve is horizontal, indicating that the economy is experiencing a high level of unemployment and spare capacity. As a result, firms can increase output without facing cost pressures, which keeps prices stable. In the other segments, the aggregate supply curve is upward sloping, suggesting that as output increases, firms must increase production costs, which puts upward pressure on prices.

Exhibit 14-1 Aggregate Supply Curve