When the AD curve is relatively flat, the Fed
A) is only willing to accept small changes in output to keep the price level stable.
B) is willing to accept large changes in the price level to keep output stable.
C) is not willing to accept any changes in output to keep the price level stable.
D) is willing to accept large changes in output to keep the price level stable.

Question

Quizplus · Accepted Answer

When the Aggregate Demand (AD) curve is relatively flat, it indicates that changes in the price level result in large changes in the quantity of output demanded. This implies that to keep the price level stable, the economy (or in this context, the Fed) is willing to accept large changes in output.

When the AD Curve Is Relatively Flat, the Fed