The Aggregate Supply Curve Relating the Price Level to Real

question 164

Multiple Choice

The aggregate supply curve relating the price level to real GDP has three distinguishing segments.Which one of the following indicates the segments?

• A) The horizontal segment reflects the increasing pressure on the price level as firms bid for resources. The upward-sloping segment reflects the availability of unused resources. The vertical segment reflects the full employment of all resources.
• B) The horizontal segment reflects the availability of unused resources. The upward-sloping segment reflects the full employment of all resources. The vertical segment reflects the increasing pressure on the price level as firms bid for resources.
• C) The horizontal segment reflects the full employment of all resources. The upward-sloping segment reflects the increasing pressure on the price level as firms bid for resources. The vertical segment reflects the availability of unused resources.
• D) The horizontal segment reflects the availability of unused resources. The downward-sloping segment reflects decreasing pressure on the price level as firms bid for resources. The vertical segment reflects the full employment of all resources.
• E) The horizontal segment reflects the availability of unused resources. The upward-sloping segment reflects increasing pressure on the price level as firms bid for resources. The vertical segment reflects the full employment of all resources.

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Definitions:

Perfectly Elastic

Describes a situation where the quantity demanded or supplied changes infinitely in response to any change in price.

Equilibrium Quantity

The quantity of goods or services that is supplied and demanded at the equilibrium price, where market supply and demand balance each other.

Equilibrium Price

The market price at which the quantity of goods supplied is equal to the quantity of goods demanded.

Demand

The amount of a product or service that buyers are prepared and capable of buying at different price levels over a specific time frame.