Consider the AD/AS model.An increase in government purchases will have no impact on equilibrium real GDP if
A)the AS curve slopes upward.
B)the AS curve is vertical.
C)the AS curve is horizontal.
D)the marginal propensity to spend is very small.
E)the simple multiplier is very small.

Question

Quizplus · Accepted Answer

If the AS curve is vertical, any increase in government purchases will only lead to an increase in the price level, with no impact on equilibrium real GDP. This is because the economy is already producing at its full capacity, so any increase in demand will only lead to higher prices and not more output.

Consider the AD/AS Model