The full employment level of real GDP can be represented on an aggregate supply and demand diagram as a/an:
A) vertical line.
B) upward-sloping line.
C) horizontal line.
D) downward-sloping line.

Question

Quizplus · Accepted Answer

The full employment level of real GDP is represented as a vertical line on an aggregate supply and demand diagram because it reflects a point where the economy is producing at its maximum sustainable output without increasing inflation. At this level, all available resources (labor, capital, etc.) are fully utilized, and the output cannot increase simply by increasing the quantity of labor or capital.

The Full Employment Level of Real GDP Can Be Represented