When the economy is at equilibrium in the horizontal range of the short-run aggregate supply curve
A) there is little upward pressure on prices because of widespread unemployment.
B) the aggregate demand curve must be horizontal as well.
C) economic conditions similar to those experienced during World War II prevail.
D) real output is equal to potential output.
E) a change in aggregate demand causes price levels to fall.

Question

Quizplus · Accepted Answer

In the horizontal range of the short-run aggregate supply curve, the economy can increase output without increasing prices because there are idle resources and widespread unemployment. This means there is little upward pressure on prices.

When the Economy Is at Equilibrium in the Horizontal Range