In terms of the price-real GDP diagram, a given expansion of the money supply will have a greater effect on prices the

Question

Quizplus · Accepted Answer

The steeper the aggregate supply curve, the smaller the increase in real GDP and the larger the increase in the price level for a given expansion of the money supply. This is because a steep aggregate supply curve indicates that the economy is close to full capacity, so increases in demand are more likely to lead to increases in prices rather than increases in output.

In Terms of the Price-Real GDP Diagram, a Given Expansion