The horizontal portion of the short-run aggregate supply curve in which there is excessive unemployment and unused capacity in the economy is
A) Say's law.
B) the classical short-run aggregate supply curve.
C) the Keynesian short-run aggregate supply curve.
D) exists when prices are flexible.

Question

Quizplus · Accepted Answer

The horizontal portion of the short-run aggregate supply curve in which there is excessive unemployment and unused capacity in the economy is associated with the Keynesian short-run aggregate supply curve. In this range, prices are sticky or inflexible, and therefore, changes in demand do not lead to changes in prices, but only lead to changes in the quantity of output supplied. This situation can arise during a recession or a period of low demand.

The Horizontal Portion of the Short-Run Aggregate Supply Curve in Which