Final answer:
The horizontal range of the AS curve represents a scenario where the economy is not at potential GDP and can have high unemployment, with changes in the price level being minimal.
Step-by-step explanation:
Understanding the Horizontal Range of the Aggregate Supply (AS) Curve and Unemployment
When analyzing the long-run AS curve and the vertical Phillips curve, one can discern the relationship between unemployment and aggregate supply. In the context of the long-run AS curve, which is depicted as vertical, shifts in aggregate demand result in changes in the price level rather than changes in output. Consequently, this means that all unemployment corresponds to the natural rate of unemployment, which is unaffected by short-term fluctuations in aggregate demand.
Transitioning to the Phillips curve, when the natural rate of unemployment is constant (e.g., at 5%), the Phillips curve will also be vertical. This implies that no matter the changes in the price level due to shifts in aggregate demand, the unemployment rate remains constant at the natural rate. As it relates to the horizontal range of the AS curve, which occurs at lower levels of real output, the economy may exhibit high unemployment while changes in the price level are minimal.
In summary, in the horizontal range of the AS curve, although the price level remains relatively stable due to small changes, short-term unemployment effects can be significant if the economy operates below potential GDP.