A change in government purchases has the greatest effect on the economy in the short run when _____.
A)the aggregate demand curve is relatively flat.
B)the aggregate demand curve is relatively steep.
C)the short-run aggregate supply curve is relatively flat.
D)the aggregate demand curve is vertical.
E)the short-run aggregate supply curve is vertical.

Question

Quizplus · Accepted Answer

When the short-run aggregate supply curve is relatively flat, changes in government purchases can lead to significant changes in output and employment, as prices do not rise much, allowing for greater economic expansion.

A Change in Government Purchases Has the Greatest Effect on the Economy