An attempt to lower unemployment with demand-side stimulus policies will cause an increase in the price level,which is illustrated by
A)A leftward shift of the Phillips curve.
B)A leftward shift of the aggregate demand curve.
C)A rightward shift of the aggregate supply curve.
D)A rightward shift of the aggregate demand curve.

Question

Quizplus · Accepted Answer

Demand-side stimulus policies aim to increase aggregate demand, which will cause a rightward shift of the aggregate demand curve. As the economy approaches full employment, the increased demand for labor will push up wages, which will increase firms' costs, causing them to increase prices. Therefore, there will be an increase in the price level.

An Attempt to Lower Unemployment with Demand-Side Stimulus Policies Will