A congressman states, "If a government attempts to increase employment through increased government spending, all we will end up with is a higher price level." This congressman assumes that the
A) aggregate demand curve is a horizontal line.
B) aggregate demand curve is a vertical line.
C) aggregate supply curve is a horizontal line.
D) aggregate supply curve is a vertical line.

Question

Quizplus · Accepted Answer

The congressman's statement implies that increased government spending will not increase output but will only lead to higher prices. This assumption is consistent with the idea that the aggregate supply curve is vertical, indicating that output is at its full employment level and cannot be increased further in the short run.

A Congressman States, "If a Government Attempts to Increase Employment