If the economy is operating on the positively sloped range of the short-run aggregate supply curve,fiscal policy that increases total spending
A) lowers total real output and raises the price level.
B) promotes increased employment with higher price levels.
C) shifts the aggregate supply curve to the right, increasing the price level.
D) raises total real output and lowers the price level.
E) shifts the aggregate demand curve to the left.

Question

Quizplus · Accepted Answer

When the economy is operating on the positively sloped range of the short-run aggregate supply curve, an increase in total spending (through fiscal policy) typically leads to higher demand for goods and services. This increased demand can lead to more employment (as firms hire to meet the demand) and higher price levels due to the increased competition for goods.

If the Economy Is Operating on the Positively Sloped Range