Over the horizontal range of the economy's AS curve (assuming such a range exists),a rightward shift of the AD curve will result in
A)an increase in prices and no change in real GDP.
B)an increase in real GDP and no change in prices.
C)an increase in both real GDP and prices.
D)a decrease in both real GDP and prices.
E)a decrease in real GDP but no change in prices.

Question

Quizplus · Accepted Answer

In the horizontal range of the Aggregate Supply (AS) curve, the economy is operating below full capacity, meaning there is slack in the economy. A rightward shift in the Aggregate Demand (AD) curve in this scenario leads to an increase in real GDP as firms increase production to meet the higher demand, but prices remain constant due to the excess capacity.

Over the Horizontal Range of the Economy's AS Curve (Assuming