The aggregate supply curve will be horizontal if

Question

Quizplus · Accepted Answer

The horizontal aggregate supply curve occurs when the economy has considerable idle capacity, which means that there is room for output to increase without causing prices to rise. In this situation, businesses are able to increase their production without incurring higher costs, thus leading to a horizontal AS curve. The other options (A, C, and D) do not lead to a horizontal AS curve. A does not affect the slope of the curve, C leads to an upward sloping curve, and D leads to a vertical sloping curve.

The Aggregate Supply Curve Will Be Horizontal If