Suppose aggregate demand increases by more than expected. Which of the following describes what will occur?
A) The price level will increase.
B) Unemployment will fall.
C) Real GDP will be greater than potential GDP.
D) All of the above answers are correct.

Question

Quizplus · Accepted Answer

An increase in aggregate demand will lead to an increase in both the price level and real GDP, but it does not necessarily lead to a reduction in unemployment. Therefore, only option D, which includes all three possible outcomes, is correct.

Suppose Aggregate Demand Increases by More Than Expected