Suppose an increase in investment spending results in an increase in equilibrium real GDP and a rise in the equilibrium price level.This implies that the aggregate supply curve for this economy is vertical.

Question

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If an increase in investment spending results in an increase in both equilibrium real GDP and the equilibrium price level, this indicates that there is a short-term upward sloping aggregate supply curve. A vertical aggregate supply curve would mean that changes in aggregate demand have no effect on the equilibrium price level, which is not likely the case in the short run.

Suppose an Increase in Investment Spending Results in an Increase