If the short-run macroeconomic equilibrium occurs in the upward-sloping range of the short-run aggregate supply curve, then an increase in government spending will lead to:
A) an increase in output.
B) a decrease in output.
C) no change in price.
D) a decrease in price.

Question

Quizplus · Accepted Answer

In the upward-sloping range of the short-run aggregate supply curve, an increase in government spending will increase aggregate demand, leading to higher output as the economy moves along the supply curve to a higher equilibrium point.

If the Short-Run Macroeconomic Equilibrium Occurs in the Upward-Sloping Range