Question

Suppose a government adopts a stimulus program that increases aggregate demand. If overall output increases only slightly but there is a sudden rise in inflation, then the economy was in the _____ zone before the stimulus program was put into effect. Group of answer choices

Answer 1

Answer: NEOCLASSICAL zone

Explanation:

The Neoclassical Zone is a zone which is located on the near-vertical side of the short run aggregate supply curve(SRAS). It is located on the far right side, where the short range supply curve is relatively sharp.

Therefore from the question suppose a government adopts a stimulus program that increases aggregate demand. If overall output increases only slightly but there is a sudden rise in inflation, then the economy was in the NEOCLASSICAL zone before the stimulus program was put into effect. Group of answer choices