With a Steep Short-Run Aggregate Supply Curve

question 251

Multiple Choice

With a steep short-run aggregate supply curve

• A) an increase in government expenditure will not have an impact on the price level.
• B) fiscal policy will be an effective tool to reduce unemployment without raising prices too much.
• C) an increase in taxes that does not change potential GDP will not decrease real GDP by much.
• D) there is a large change in real GDP whenever the price level rises.

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Definitions:

Fair Value

A market-based measurement that reflects the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties.

Pre-Tax Profit

The profit earned by a business before any tax is deducted.

Intercompany Sales

Transactions of goods or services between divisions or subsidiaries within the same parent company.

Gross Margin

The difference between revenue and cost of goods sold, expressed as a percentage of revenue.