Question

If aggregate supply is vertical, then which of the following statements must be true?

A) Aggregate demand does not affect the quantity of output.
B) Aggregate demand does not cause inflationary changes in price level.
C) Inflation will accompany any rise in output.
D) Inflation creates greater social benefits.

Answer 1

Answer: A. Aggregate demand does not affect the quantity of output.

Explanation: Aggregate supply curve is perfectly vertical in a long run, Economist believed that the changes in aggregate demand only caused a temporal change in an economy output

Aggregate supply in a short run, the quantity supplies increase as price rise.

Aggregate demand does not affect the quantity of output If the aggregate supply is vertical.