If the economy's short-run aggregate supply curve is upward sloping, an increase in Jaggregate demand will cause
A) an increase in the price level and employment.
B) a decrease in the price level and employment.
C) an increase in the price level and a decrease in employment.
D) a decrease in the price level and an increase in employment.

Question

Quizplus · Accepted Answer

An increase in aggregate demand will lead to an increase in both the price level and employment when the short-run aggregate supply curve is upward sloping. This is because as demand for goods and services increases, firms increase production and hire more workers, leading to an increase in employment. However, since the short-run supply curve is upward sloping, the increase in production will come at a higher cost, leading to an increase in price levels.

If the Economy's Short-Run Aggregate Supply Curve Is Upward Sloping