Consider the following statement: "If the government attempts to raise employment through increased fiscal spending, all it will end up doing is increasing the price level." The statement rests on the assumption that:
A) the aggregate demand curve is a horizontal line.
B) the aggregate supply curve is a vertical line.
C) the aggregate supply curve is upward-sloping.
D) the aggregate supply curve is downward-sloping.
E) the aggregate supply curve is a horizontal line.

Question

Quizplus · Accepted Answer

The statement implies that increasing fiscal spending will not increase output but will only increase prices. This scenario occurs when the aggregate supply curve is vertical, indicating that the economy is at full capacity and cannot increase output in response to increased demand.

Consider the Following Statement: "If the Government Attempts to Raise