Final answer:
The intermediate range of the AS curve involves understanding the effects of supply shocks, long-run equilibrium where output is unaffected by aggregate demand shifts, short-run adjustments where both price and output change, and the implications of fiscal policy on aggregate demand and economic equilibrium. So (c) is the correct option.
Step-by-step explanation:
The intermediate range of the aggregate supply (AS) curve can be understood through various economic concepts. Supply shocks can cause the AS curve to shift, impacting the equilibrium price level and output. The concept of long-run equilibrium is depicted by a vertical long-run AS curve, indicating that shifts in aggregate demand lead to changes in the price level but not in the output, which is determined by the economy's potential GDP. Short-run adjustments, on the other hand, occur when shifts in aggregate demand intersect with the upward-sloping portion of the AS curve, thus affecting both the price level and output.
Moreover, the implications of fiscal policy include influencing components of aggregate demand (C, I, G, X-M) to either expand or contract the economy, affecting price level and output differentially according to the slope of the AS curve at the point of intersection with the AD curve.