The short-run aggregate supply curve is horizontal if
A) resources were fully utilized.
B) there are unutilized resources in the economy.
C) resources are perfectly adaptable between production processes.
D) there are high inflation rates.

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve is horizontal when there are unutilized resources in the economy, indicating that increases in demand can lead to increases in output without leading to higher prices. This is because the economy can increase production using these unutilized resources without the need to increase prices.

The Short-Run Aggregate Supply Curve Is Horizontal If