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At the far left of the aggregate supply curve, where output is far below potential GDP and many factories sit idle, what can a small rise in the output price level do to the quantity of aggregate supply?
AEncourage a considerable surge in aggregate supply
BHave no effect on aggregate supply at all
CPush aggregate supply into negative territory
DProduce only a barely noticeable increase in output
Answer & Solution
Correct answer: A. Encourage a considerable surge in aggregate supply
1. Far below potential GDP, many workers and factories are idle and ready to swing into production.
2. With so much slack capacity available, only a small rise in output prices is needed to pull a lot of extra output onto the market.
3. This is why the far-left portion of the AS curve is drawn nearly flat rather than steep.
4. Options B, C, and D all describe a weak or absent response, the opposite of what the flat region shows.
_Source: OpenStax Principles of Macroeconomics for AP Courses (CC BY 4.0), Ch 10 "The Aggregate Demand/Aggregate Supply Model", section 10.2 | Building a Model of Aggregate Demand and Aggregate Supply_
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