Assuming that the economy is producing at full employment, an increase in demand by households leads to:

Question

Quizplus · Accepted Answer

When the economy is at full employment, an increase in demand by households typically leads to an increase in the price level because producers cannot increase output significantly due to the economy operating at its capacity. This scenario is described by demand-pull inflation, where increased demand for goods and services leads to higher prices.

Assuming That the Economy Is Producing at Full Employment, an Increase