The exact change in equilibrium output due to a shift in short-run aggregate demand depends on:
A)the amount of tax imposed
B)the steepness of the aggregate supply curve.
C)the steepness of the aggregate demand curve
D)the gap between the supply curve and the demand curve.
E)the consumption pattern in the economy.

Question

Quizplus · Accepted Answer

The steepness of the aggregate supply curve determines how much a shift in the aggregate demand curve affects the equilibrium output. A steeper aggregate supply curve means that any shift in aggregate demand will result in a smaller change in output and a larger change in the price level, while a flatter aggregate supply curve means a larger change in output and a smaller change in the price level.

The Exact Change in Equilibrium Output Due to a Shift