According to the theory of economic fluctuations, which of the following explains the relationship between aggregate demand and employment during an economic expansion?
A)Workers decide they have more leisure time than they prefer.As a result they decide to work more, causing more labor to be employed.This causes an increase in production.
B)An increase in aggregate demand causes real GDP to increase as firms adjust their production.More workers are hired as a result.
C)An increase in output causes potential GDP to decrease.This causes employment to increase.
D)A decrease in real GDP causes aggregate demand to increase.As a result, firms hire more workers.
E)An increase in aggregate demand causes potential GDP to increase.The resulting increase in output causes employment to increase.

Question

Quizplus · Accepted Answer

An increase in aggregate demand causes firms to increase production.This results in an increase in real GDP and consequently more workers are hired to meet the production demand.

According to the Theory of Economic Fluctuations, Which of the Following