When aggregate supply is at its maximum, which statements are true?

When aggregate supply is at its maximum, which statements are true?

• A. Everyone is employed
• B. No more capital available for investment
• C. Both A and B
• D. None of the above

Answer: (C)

When aggregate supply is at its maximum, the economy is operating at full capacity with resources fully utilized. That means the labor force is being used to its fullest (little or no slack), and the existing capital stock is also fully employed. Because there’s no idle capacity, everyone who can be employed is effectively working, reflecting full utilization of labor. At the same time, with capital already in use, there’s little spare capacity to add more production without displacing current output or waiting for new capital to come online. So there’s not much room for additional investment in the immediate sense. In short, full capacity implies both that most of the available labor is employed and that there’s no easy, immediate way to invest more capital without expanding the capacity itself.

When aggregate supply is at its maximum, the economy is operating at full capacity with resources fully utilized. That means the labor force is being used to its fullest (little or no slack), and the existing capital stock is also fully employed.

Because there’s no idle capacity, everyone who can be employed is effectively working, reflecting full utilization of labor. At the same time, with capital already in use, there’s little spare capacity to add more production without displacing current output or waiting for new capital to come online. So there’s not much room for additional investment in the immediate sense.

In short, full capacity implies both that most of the available labor is employed and that there’s no easy, immediate way to invest more capital without expanding the capacity itself.