On a Keynesian-style aggregate supply curve,expansionary fiscal and monetary policies have the smallest impact on the price level when the economy is operating in the ________ range.
A) horizontal
B) coincident
C) intermediate
D) vertical
E) optimal

Question

Quizplus · Accepted Answer

In the horizontal range of the Keynesian-style aggregate supply curve, the economy is typically operating below full capacity, meaning there is slack in the economy. Expansionary fiscal and monetary policies in this range primarily increase output without causing significant increases in the price level, as there are underutilized resources that can absorb the increased demand.

On a Keynesian-Style Aggregate Supply Curve,expansionary Fiscal and Monetary Policies