(Figure: Determining SRAS Shifts) Which statement is NOT correct?
A) Equilibrium output is $3,000 worth of goods and services.
B) An increase in aggregate demand would lead to deflation.
C) Full employment occurs when the economy produces $3,000 worth of goods and services.
D) In short-run equilibrium, output can be greater than or less than $3,000.

Question

(Figure: Determining SRAS Shifts) Which statement is NOT correct? 
A) Equilibrium output is $3,000 worth of goods and services. 
B) An increase in aggregate demand would lead to deflation. 
C) Full employment occurs when the economy produces $3,000 worth of goods and services. 
D) In short-run equilibrium, output can be greater than or less than $3,000.

Quizplus · Accepted Answer

An increase in aggregate demand would lead to an increase in both output and price level (inflation), not deflation.

(Figure: Determining SRAS Shifts) Which Statement Is NOT Correct