-Refer to Figure 11.1. If the AE function in panel a) had a lower slope, in panel b):
A) the AD function would have a lower slope.
B) the AD function would have a steeper slope.
C) the AD function would be vertical.
D) the AD function would not be affected.

Question

-Refer to Figure 11.1. If the AE function in panel a) had a lower slope, in panel b):
A) the AD function would have a lower slope. 
B) the AD function would have a steeper slope. 
C) the AD function would be vertical. 
D) the AD function would not be affected.

Quizplus · Accepted Answer

If the AE function in panel a) had a lower slope, the AD function in panel b) would have a steeper slope because a lower slope in the AE function would lead to a higher level of equilibrium output, which would in turn lead to a higher level of aggregate demand and a steeper slope in the AD function.