On a Keynesian-style aggregate supply curve,increases in aggregate demand produce the greatest inflationary pressure when the economy operates in the ________ range.
A) horizontal
B) coincident
C) intermediate
D) vertical
E) optimal

Question

Quizplus · Accepted Answer

In the vertical range of the Keynesian-style aggregate supply curve, the economy is at full employment and any increase in aggregate demand can only lead to inflationary pressure as there is no room for increased output. Therefore, increases in aggregate demand produce the greatest inflationary pressure in this range.

On a Keynesian-Style Aggregate Supply Curve,increases in Aggregate Demand Produce