If the SP curve is steep then monetary and fiscal policy will have a ________ effect on inflation and a ________ effect on unemployment.
A)large;large
B)large;small
C)small;large
D)small;small

Question

Quizplus · Accepted Answer

If the SP curve is steep, that means the economy is producing close to its potential output. In this case, expansionary monetary or fiscal policy will have a limited effect on increasing output, but it will push up the price level or inflation. Hence the effect on inflation will be large, but the effect on unemployment will be small.

If the SP Curve Is Steep Then Monetary and Fiscal