When there is an increase in aggregate demand in the short run, there will be an increase in the
price level but not in the level of output or employment.

Question

Quizplus · Accepted Answer

In the short run, an increase in aggregate demand will lead to an increase in both the price level and the level of output and employment due to the existing spare capacity in the economy. This is known as the short-run aggregate supply curve being upward sloping.

When There Is an Increase in Aggregate Demand in the Short