An increase in AD will trigger less inflation under which of the following conditions?
A)AD is relatively steep.
B)AD is relatively flat.
C)AS is relatively steep.
D)AS is relatively flat.

Question

Quizplus · Accepted Answer

When the AS is relatively flat, an increase in AD will cause a relatively small increase in the price level and a larger increase in real output. This is because firms can increase their output without having to increase their costs significantly. Therefore, option D is the best choice.

An Increase in AD Will Trigger Less Inflation Under Which