Suppose for a given economy the multiplier is 4.A change in autonomous spending will change the economy's total spending more if the aggregate supply curve is __________ than if it is __________,ceteris paribus.
A) horizontal; upward sloping
B) upward sloping; horizontal
C) upward sloping; downward sloping
D) downward sloping; upward sloping
E) There is not enough information to answer the question.

Question

Quizplus · Accepted Answer

When the aggregate supply curve is horizontal, it indicates that the economy can produce more without increasing prices, allowing the full effect of the multiplier to influence total spending. In contrast, an upward-sloping aggregate supply curve suggests that increases in demand lead to higher prices and potentially less real output increase, thus reducing the effectiveness of the multiplier compared to a situation with a horizontal supply curve.

Suppose for a Given Economy the Multiplier Is 4