The closer the aggregate supply curve is to being horizontal,the
A) greater the resulting change in Real GDP for a given change in autonomous spending.
B) smaller the resulting change in Real GDP for a given change in autonomous spending.
C) larger the multiplier.
D) smaller the multiplier.
E) a and c

Question

Quizplus · Accepted Answer

When the aggregate supply curve is closer to being horizontal, it means that the economy is operating at or near full capacity, and any increase in aggregate demand will have a larger effect on Real GDP. Therefore, choice A is correct, as the resulting change in Real GDP for a given change in autonomous spending will be greater. Choice B is incorrect, as the effect on Real GDP will be larger, not smaller. Choice C is also correct, as a larger multiplier means that a given change in autonomous spending will have a greater effect on Real GDP. Choice D is incorrect, as a smaller multiplier would mean that the effect on Real GDP would be smaller. Choice E is partially correct, but only choice A and C answer the question directly.

The Closer the Aggregate Supply Curve Is to Being Horizontal,the