If people correctly anticipate an increase in aggregate demand, a result is
A) there are no predictable results associated with an anticipated increase in aggregate demand.
B) workers demanding higher money wages to keep the real wage unchanged.
C) an increase in the real value of outstanding government debt.
D) a lower rate of inflation in the current time period.

Question

Quizplus · Accepted Answer

If people correctly anticipate an increase in aggregate demand, workers will anticipate higher prices for goods and services and demand higher money wages to keep the real wage unchanged, leading to a shift of the short-run aggregate supply curve to the left. This would result in higher prices as the economy reaches a new equilibrium point.

If People Correctly Anticipate an Increase in Aggregate Demand, a Result