In the case of an upward-sloping aggregate supply curve,the change in real GDP brought about by a change in government spending will be less than that predicted by the simple government purchases multiplier.

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An upward-sloping aggregate supply curve implies that as output increases, the cost of production also increases, which in turn leads to an increase in the price level. Thus, a change in government spending may lead to cost-push inflation and higher prices instead of a proportionate increase in real GDP. Therefore, the actual change in real GDP will be less than what the simple government purchases multiplier predicts.

In the Case of an Upward-Sloping Aggregate Supply Curve,the Change