If an economy were on the steep portion of its short- run aggregate supply curve, a contractionary economic policy would result in a small decrease in equilibrium output and a large decrease in the equilibrium price level.

Question

Quizplus · Accepted Answer

In the steep portion of the short-run aggregate supply curve, output is less responsive to changes in demand, so contractionary policy would lead to a larger decrease in the price level and a smaller decrease in output.

If an Economy Were on the Steep Portion of Its