According to new Keynesian economics:
A)the aggregate supply curve is horizontal at relatively low levels of real GDP and becomes negatively sloped, as more and more industries reach their full capacity level of output.
B)the aggregate supply curve is negatively sloped at relatively low levels of real GDP and becomes horizontal, as more and more industries reach their full capacity level of output.
C)the aggregate supply curve is horizontal at relatively low levels of real GDP and becomes positively sloped, as more and more industries reach their full capacity level of output.
D)the aggregate supply curve is positively sloped at relatively low levels of real GDP and becomes horizontal, as more and more industries reach their full capacity level of output.
E)the aggregate supply curve is positively sloped at relatively low levels of real GDP and becomes negatively sloped, as more and more industries reach their full capacity level of output.

Question

Quizplus · Accepted Answer

In new Keynesian economics, the aggregate supply curve is horizontal at low levels of GDP due to price and wage stickiness, and becomes positively sloped as output increases and firms face capacity constraints.

According to New Keynesian Economics