A rightward shift of the AD curve in the very ﬂat part of the short-run AS curve will
A) increase real output by more than the price level.
B) increase the price level by more than real output.
C) reduce real output by more than the price level.
D) reduce the price level by more than real output.

Question

Quizplus · Accepted Answer

In the very flat region of the short-run AS curve, the increase in aggregate demand will result in a larger increase in real output than in the price level. This is because the economy is already operating at or near full capacity, so any additional demand can be met with an almost proportional increase in output without significant upward pressure on prices. Therefore, choice A is the best answer.

A Rightward Shift of the AD Curve in the Very