In the short run,if AD increases,the unemployment rate will
A)Rise,and the price level will rise.
B)Fall,and the price level will rise.
C)Rise,and the price level will fall.
D)Fall,and the price level will fall.

Question

Quizplus · Accepted Answer

In the short run, an increase in aggregate demand leads to an increase in output and a decrease in unemployment. However, as the economy approaches full employment, the increased demand will lead to upward pressure on prices. This is known as demand-pull inflation. Therefore, in the short run, an increase in AD leads to a fall in unemployment (as firms hire more workers to meet the increased demand) and a rise in the price level.

In the Short Run,if AD Increases,the Unemployment Rate Will