A perfectly elastic aggregate supply curve implies that:

(A) There is fuller utilization of resources in the economy.

(B) There is unemployment of resources in the economy.

(C) There is excess capacity in the economy.

(D) Aggregate demand is less in the economy.

Choose the correct answer from the options given below:

Option 1 -> Incorrect because fuller utilization of resources is associated with an inelastic or vertical AS curve, not a perfectly elastic one.

Option 2 -> Correct. A perfectly elastic (horizontal) AS curve occurs when there is unemployment of resources, excess capacity, and typically lower aggregate demand, allowing output to expand without price increases.

Option 3 -> Incorrect because fuller utilization contradicts the conditions of a perfectly elastic AS curve.

Option 4 -> Incorrect because fuller utilization is not consistent with a perfectly elastic AS curve.

Hence, Option 2: (B), (C) and (D) only -> A perfectly elastic aggregate supply curve is horizontal, indicating the economy can increase output without raising prices. This occurs when there is unemployment of resources (B), excess capacity in firms (C), and insufficient aggregate demand (D). The economy operates below full employment, with idle resources that can be mobilized. Fuller utilization (A) would create an upward-sloping or vertical AS curve as resource constraints emerge. -> correct