Under what condition will an increase in aggregate demand result in no increase in the price level?

Question

Quizplus · Accepted Answer

When the aggregate demand curve intersects the horizontal segment of the aggregate supply curve, any increase in aggregate demand will result in no change in the price level. This is because the economy can produce more output without increasing the costs of inputs, which means that firms can increase production without increasing the price of their goods and services. Therefore, there is no need for prices to rise to allocate scarce resources.

Under What Condition Will an Increase in Aggregate Demand Result