When the AS curve is vertical,increases in AD will
A)Increase the average price level but have no impact on unemployment.
B)Increase the average price level and decrease unemployment.
C)Increase both the average price level and unemployment.
D)Have no impact on either the average price level or unemployment.

Question

Quizplus · Accepted Answer

When the Aggregate Supply (AS) curve is vertical, it indicates that the economy is at full capacity or full employment. In this scenario, increases in Aggregate Demand (AD) will only lead to higher prices (inflation) without affecting the level of output or unemployment. This is because the economy cannot produce beyond its full capacity, so any extra demand only pushes prices up.

When the AS Curve Is Vertical,increases in AD Will