If the Fed has a strong preference for stable output relative to prices, the ________ curve is relatively ________.
A) AD; steep
B) AD; flat
C) AS; steep
D) AS; flat

Question

Quizplus · Accepted Answer

If the Fed has a strong preference for stable output relative to prices, the AD curve is relatively steep. This is because a steep AD curve means that output is very responsive to changes in the price level. So, if the Fed wants to keep output stable, it will need to make sure that the price level does not change much.

If the Fed Has a Strong Preference for Stable Output