Suppose the short-run aggregate supply curve is steep.For a given increase in aggregate demand, how much will real GDP and price level increase?
A) The increase in real GDP will be relatively small, and the increase in the price level will be relatively large.
B) The increase in real GDP will be relatively large, and the increase in the price level will be relatively small.
C) The increase in real GDP will be large, and the increase in price level will be large.
D) The increase in real GDP will be small, and the increase in price level will be small.

Question

Suppose the short-run aggregate supply curve is steep.For a given increase in aggregate demand, how much will real GDP and price level increase?  
A) The increase in real GDP will be relatively small, and the increase in the price level will be relatively large. 
B) The increase in real GDP will be relatively large, and the increase in the price level will be relatively small. 
C) The increase in real GDP will be large, and the increase in price level will be large. 
D) The increase in real GDP will be small, and the increase in price level will be small.

Quizplus · Accepted Answer

A steep short-run aggregate supply curve means that a small increase in aggregate demand will lead to a significant increase in the price level but only a small increase in real GDP. Therefore, the best choice is A - the increase in real GDP will be relatively small, and the increase in the price level will be relatively large.

Suppose the Short-Run Aggregate Supply Curve Is Steep