Purchase Solution

short-run aggregate supply curve

Not what you're looking for?

Ask Custom Question

2. (The Multiplier and the Time Horizon) Explain how the steepness of the short-run aggregate supply curve affects the government's ability to use fiscal policy to change real GDP.

Purchase this Solution

Solution Summary

Multiplier and the Time Horizon are applied.

Solution Preview

Answers:

If the aggregate supply curve is very steep, it implies that the economy is close to the full employment situation. Because the vertical aggregate supply curve implies the situation of full employment. At this situation, when the government implements expansionary fiscal policies, then initially the aggregate demand curve will shift to right. But, when the aggregate supply curve is very steep, the increase in AD would result in greater increase in prices ...

Purchase this Solution


Free BrainMass Quizzes
Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.