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Subject - Economics:

Macroeconomics

MCQ - 196-4206

Question:

If the short-run aggregate supply curve is horizontal, it is because

  1. there exist many unemployed resources so that output can be increased without increasing wages and prices.
  2. any increase in output requires a corresponding increase in wages and prices.
  3. increases in output cause prices to increase, but wages adjust much less quickly.
  4. any increase in output requires a corresponding increase in wages and prices.
  5. resources are fully employed so that output can be increased but only if the price level also increases.

Correct Answer: A

Explanation:

The horizontal range of SRAS occurs when resources are unemployed. If output rises, wages do not rise and prices are constant.

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269 MCQ for effective preparation of the test of Macroeconomics of Economics section.

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