Suppose Firms Are Currently Producing Output at a Level Beyond

question 69

Multiple Choice

Suppose firms are currently producing output at a level beyond their normal capacity.In this situation,the AS curve will be relatively ________ and a positive AD shock will result in ________.

• A)steep; an increase in the price level with a small increase in real GDP
• B)flat; an equal increase in the price level and in real GDP
• C)flat; a very small increase in prices but a large increase in real GDP
• D)flat; a very small decrease in the price level and a decrease in real GDP
• E)steep; a decrease in the price level and a very small decrease in real GDP

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