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In Figure 11

Question 89

Multiple Choice

In Figure 11.1,assume that Q<sub>F</sub> is full-employment output and the level of aggregate spending is represented by AD<sub>1</sub>.If AD<sub>1</sub> increases to AD<sub>2</sub>,which of the following statements is correct? A) Full employment will be reached. B) Excess AD and inflation will be the result. C) Full employment will not be reached because some of the additional spending results in higher prices rather than higher output. D) A lower price level will result. In Figure 11.1,assume that QF is full-employment output and the level of aggregate spending is represented by AD1.If AD1 increases to AD2,which of the following statements is correct?


A) Full employment will be reached.
B) Excess AD and inflation will be the result.
C) Full employment will not be reached because some of the additional spending results in higher prices rather than higher output.
D) A lower price level will result.

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