Consider the following statement: "If the government attempts to raise employment through increased fiscal spending, all it will end up doing will be to increase the price level." The statement rests on the assumption that:
A)the aggregate demand curve is a horizontal line.
B)the aggregate supply curve is a vertical line.
C)the aggregate supply curve is upward-sloping.
D)the aggregate supply curve is downward-sloping.
E)the aggregate supply curve is a horizontal line.

Question

Quizplus · Accepted Answer

The statement assumes that the aggregate supply curve is vertical, meaning that output is fixed and any increase in demand will only lead to higher prices, not more output or employment.

Consider the Following Statement: "If the Government Attempts to Raise