How does the shape of the aggregate supply curve affect macroeconomic analysis and policy making? Illustrate your answer with the appropriate graphs
If the aggregate supply curve is relatively flat, as depicted in Figure 15-3, expansionary fiscal or monetary policy can buy large increases in real GDP without significant inflationary costs. Conversely, contractionary policy will cause significant losses of income and employment without much reduction of inflation. If the aggregate supply curve is relatively steep, as illustrated in Figure 15-46, expansionary fiscal or monetary policy will generate significant inflation without the benefit of large increases in real GDP or employment. Conversely, contractionary policy can achieve significant reductions in inflation without causing large reductions of real GDP or large increases in unemployment.
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When the Fed conducts open market operations, it
A) is engaging in fiscal policy. B) purchases or sells government bonds issued by the U.S. Treasury. C) shifts the demand for money curve. D) also raises taxes at the same time.
Which of these economies has the highest saving rate?
A) Greece B) China C) United States D) Brazil E) Japan
A tax is proportional if, as a person's income rises, the
a. tax rate remains unchanged b. tax rate falls c. tax rate rises d. amount of the tax remains unchanged e. amount of the tax falls
Which of the following would be the best choice for the government of Paulina if it decides to stimulate its economy by increasing consumption?
a. An excise tax on pharmaceuticals b. An excise tax on resort stays c. A subsidy for utility payments d. A subsidy for clothing