Question

When the aggregate supply curve is vertical, which of the following is not true? Group of answer choices The economy is producing the maximum sustainable level of output. Any increase in the price level will not cause an increase in aggregate output. The economy is expanding quickly. The economy is at capacity.

Answer 1

The economy is expanding quickly.

Step-by-step explanation:

Aggregate supply is a measure of the total supply of goods and services made available by the supplier in an economy.

The normal aggregate supply curve is one with a positive slope. That is as price increases there is an increase in aggregate supply, and when price reduces aggregate supply also reduces.

However when aggregate supply curve is vertical, only one level of output is produced no matter the rise or fall of price.

This indicates that the economy is producing at capacity, and any increase in price will not result in increase in output.

It does not mean that the economy is expanding quickly.