If aggregate demand and nominal GDP increase while the price level is constant, we would conclude that
A) the economy is already at full employment.
B) the aggregate supply curve is upward sloping.
C) the aggregate supply curve is horizontal.
D) the aggregate demand curve is vertical.

Question

Quizplus · Accepted Answer

When aggregate demand and nominal GDP increase while the price level remains constant, it indicates that the aggregate supply curve is horizontal. This suggests that there are enough resources and capacity in the economy to meet the higher demand without increasing prices, typically a characteristic of an economy not at full employment.

If Aggregate Demand and Nominal GDP Increase While the Price