When aggregate output is determined solely by the level of aggregate demand, the relation between aggregate supply and price is?

Perfectly Elastic.

The correct answer is Option (3) → Perfectly Elastic.

When aggregate output is determined solely by the level of aggregate demand, it refers to a situation where the economy has unused capacity or unemployment, often modeled in the Keynesian short-run.

In this case, aggregate supply (AS) curve is:

• Horizontal, meaning perfectly elastic

• Output can increase without any change in price level, as firms can increase production by using idle resources.