Given a ﬁxed upsloping AS curve, a rightward shift of the AD curve will
A) cause cost-push inﬂation.
B) increase real output but not the price level.
C) increase the price level but not real output.
D) increase both the price level and real output.

Question

Quizplus · Accepted Answer

A rightward shift of the AD curve will increase both the price level and real output, as the increase in demand for goods and services will lead to an increase in both prices and output. Cost-push inflation is caused by increases in production costs, not by shifts in the AD curve. Increases in real output without a corresponding increase in the price level would only occur if the AS curve were also shifting to the right, which is not specified in the prompt.

Given a ﬁXed Upsloping AS Curve, a Rightward Shift of the AD