How will a steeper short-run aggregate supply curve affect equilibrium output?
A) The impact of a shift in aggregate demand on equilibrium output will be smaller.
B) The value of the spending multiplier will be larger, and will thus have a greater impact on equilibrium output.
C) The impact of a shift in aggregate demand on equilibrium output will be larger.
D) A smaller change in government spending will be needed to achieve the desired change in equilibrium output.

Question

How will a steeper short-run aggregate supply curve affect equilibrium output?  
A) The impact of a shift in aggregate demand on equilibrium output will be smaller. 
B) The value of the spending multiplier will be larger, and will thus have a greater impact on equilibrium output. 
C) The impact of a shift in aggregate demand on equilibrium output will be larger. 
D) A smaller change in government spending will be needed to achieve the desired change in equilibrium output.

Quizplus · Accepted Answer

A steeper short-run aggregate supply curve means that changes in aggregate demand will have a smaller effect on output and a larger effect on prices. This is because a steeper curve indicates less flexibility in the economy's ability to increase production in response to increased demand.

How Will a Steeper Short-Run Aggregate Supply Curve Affect Equilibrium