Asked by Paris Smith on Jun 04, 2024
Verified
If the economy is in the vertical portion of the AS curve,what will be the effect of an increase in the price level on output produced?
A) Output will increase at a very rapid rate
B) Output will not change
C) Output will only slightly increase
D) Output change cannot be predicted from information given
Aggregate Supply (AS) Curve
A graphical representation in economics that shows the total supply of goods and services that firms in an economy are willing to produce at a given price level in a given period.
Price Level
The average of current prices across the entire spectrum of goods and services produced in the economy, an indicator of inflation or deflation.
Output Produced
The total quantity of goods and services produced by an economic system during a given period.
- Understand the impact of price level changes on output and employment in different economic conditions.
Verified Answer
ZK
Zybrea KnightJun 07, 2024
Final Answer :
B
Explanation :
If the economy is in the vertical portion of the AS (aggregate supply) curve, it means that the economy has reached its full capacity and producing at the maximum level, also known as the potential output. Therefore, any increase in the price level will not cause any increase in output, as the economy is already producing at its maximum capacity.
Learning Objectives
- Understand the impact of price level changes on output and employment in different economic conditions.