Other things equal, the steeper the slope of the aggregate supply curve, the more effective will be the expansionary fiscal policy.

Question

Quizplus · Accepted Answer

A steeper slope on the aggregate supply curve indicates that the economy is less responsive to changes in aggregate demand, meaning that expansionary fiscal policy may have little effect on increasing output and lowering unemployment. In contrast, a flatter slope indicates that the economy is more responsive to changes in aggregate demand, making expansionary fiscal policy more effective.

Other Things Equal, the Steeper the Slope of the Aggregate