Suppose an increase in government spending stimulates real GDP without affecting the price level. What is the relevant range of the aggregate supply curve in this case?
A) the classical range
B) the intermediate range
C) the Keynesian range
D) the monetarist range

Question

Quizplus · Accepted Answer

This scenario represents the Keynesian range of the aggregate supply curve, where the economy is operating below its potential output and an increase in government spending can stimulate production without causing inflationary pressures. The classical range assumes full employment and the intermediate range assumes some degree of price flexibility, while the monetarist range emphasizes the role of monetary policy in influencing aggregate demand.

Suppose an Increase in Government Spending Stimulates Real GDP Without