Suppose an economy has an upward-sloping AS curve and an inflationary gap equal to $10 billion.If AD shifts to the left by $10 billion,
A)Real output will fall by less than $10 billion.
B)Real output will fall by $10 billion.
C)The inflationary gap will be eliminated.
D)A recessionary gap will be created.

Question

Quizplus · Accepted Answer

With an upward-sloping AS curve, a leftward shift in AD will lead to a smaller decrease in real output than the shift itself due to the slope of the AS curve.

Suppose an Economy Has an Upward-Sloping AS Curve and an Inflationary