When the short-run aggregate supply curve is steep,then for a given increase in aggregate demand,
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 increases in real GDP and the price level will be large
D)the increases in real GDP and the price level will be small
E)the decrease in real GDP will be larger than the decrease in the price level

Question

Quizplus · Accepted Answer

When the short-run aggregate supply curve is steep, it indicates that the economy can only increase output by a small amount in response to an increase in aggregate demand. Therefore, for a given increase in aggregate demand, the increase in real GDP will be relatively small. However, since the supply curve is steep, any increase in demand will put upward pressure on prices, leading to a relatively large increase in the price level.

When the Short-Run Aggregate Supply Curve Is Steep,then for a Given