Question

please help both

1. when the aggregate supply curve is vertical, which of the following is not true?

1. the economy is producing the maximum sustainable level of output.

2. any increase in the price level will not cause an increase in aggregate output.

3. the economy is expanding quickly

4. the economy is at capacity

2. if the economy is operating on the relatively vertical segment of the aggregate supply curve, an increase in aggregate demand causes a ________ change in the price level and a ______ change in output.

1. big;small

2. small;small

3. small;big

4. big;big

Answer 1

1. The economy is expanding quickly because in long run aggregate supply is vertical due to all resources are on full utilisation. Economy is not expanding because resources are already fully utilised .

2. Big,small an increase in aggregate demand causes a big change in the price level and the small change in output so answer 1 is correct.