If the price level is stable and if aggregate spending increases, a significant change in output occurs, showing the full impact of the spending multiplier.

Question

Quizplus · Accepted Answer

If the price level is stable, then aggregate spending will directly translate into an increase in output, as there will be no inflationary effects to reduce the impact of the spending multiplier. Therefore, a significant change in output will occur, showing the full impact of the spending multiplier.

If the Price Level Is Stable and If Aggregate Spending