If AD increases, which of the following will result? a. an increase in output and an increase in the price level. b. an increase in output and a decrease in the price level. c. a decrease in output and an increase in the price level. d. a decrease in output and a decrease in the price level.

Question

Mary Fischer

Business

17 September, 04:15

If AD increases, which of the following will result? a. an increase in output and an increase in the price level. b. an increase in output and a decrease in the price level. c. a decrease in output and an increase in the price level. d. a decrease in output and a decrease in the price level.

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Answers (1)

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Jayce Novak · Answer 1

a. an increase in output and an increase in the price level.

Explanation:

If Aggregate Demand increases, this will result in an increase in output and an increase in the price because short run aggregate demand measures total output for a single nominal price level

In the long-run, increases in aggregate demand cause the price of a good or service to increase. When the demand increases the aggregate demand curve shifts to the right.

Also, increased demand for a product in the long run will lead to increased output being supplied.

The aggregate supply determines the extent to which the aggregate demand increases the output and prices of a good or service.