In order for an increase in aggregate demand to raise Real GDP and the price level,the aggregate supply curve must be ____________________.If an increase in aggregate demand raises the price level but leaves Real GDP unchanged,the aggregate supply curve must be _____________________.

Question

Quizplus · Accepted Answer

An increase in aggregate demand will lead to an increase in Real GDP and the price level only if the aggregate supply curve is upward-sloping. However, if an increase in aggregate demand raises the price level but leaves Real GDP unchanged, it indicates that there is a limit to the economy's capacity to produce more output. This can happen only if the aggregate supply curve is vertical, indicating that the economy has reached its full potential output level.

In Order for an Increase in Aggregate Demand to Raise