The short-run aggregate supply curve is horizontal when
A) prices are inflexible and the economy is at full employment.
B) there are unemployed resources and prices do not increase when aggregate demand increases.
C) there are unemployed resources and prices do not decrease when aggregate supply increases.
D) there are no unemployed resources and prices do not increase when aggregate demand or supply increases.
Question 2
A recession causes a decrease in the demand for housing, resulting in substantial layoffs in the construction industry. This is an example of
A) cyclical unemployment.
B) frictional unemployment.
C) seasonal unemployment.
D) structural unemployment.
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