The analysis of the short-run and long-run Phillips Curve suggests that an increase in aggregate demand
A)influences real output and employment in the long run, but not in the short run.
B)influences real output and employment in the short run, but not in the long run.
C)does not influence the price level in the short run or the long run but only real output and employment.
D)does not influence real output and employment in the short run or the long run but only the price level.

Question

Quizplus · Accepted Answer

In the short run, an increase in aggregate demand can lead to higher real output and employment due to price and wage stickiness. However, in the long run, the economy adjusts, and output returns to its natural level, leaving only higher price levels.

The Analysis of the Short-Run and Long-Run Phillips Curve Suggests