An economist who claims that an increase in government spending would result mainly in a higher price level believes the economy is operating where

Question

Quizplus · Accepted Answer

If an increase in government spending leads to mainly a higher price level, then it suggests that the aggregate supply curve is steep. This is because a steep aggregate supply curve indicates that the economy is already operating at or near its full capacity and any increase in demand (such as from government spending) would lead mainly to higher prices and minimal increase in output.

An Economist Who Claims That an Increase in Government Spending