In the _______ range of the aggregate supply curve, expansionary fiscal policy that causes aggregate ______ to increase will lead to a higher price level and a higher equilibrium level of real GDP.
A) Keynesian, supply
B) Classical, demand
C) Intermediate, demand
D) Intermediate, supply

Question

In the _______ range of the aggregate supply curve, expansionary fiscal policy that causes aggregate ______ to increase will lead to a higher price level and a higher equilibrium level of real GDP. ​
A) ​Keynesian, supply
B) ​Classical, demand
C) ​Intermediate, demand
D) ​Intermediate, supply

Quizplus · Accepted Answer

In the intermediate range of the aggregate supply curve, an increase in aggregate demand due to expansionary fiscal policy will both raise the price level and increase the equilibrium level of real GDP. This is because, in this range, there is some spare capacity, but as output increases, prices start to rise as well.

In the _______ Range of the Aggregate Supply Curve, Expansionary