If there is an excess demand situation in the economy at the current price level, then the:
A)price level will remain the same
B)economy must be operating on the flat section of the AS curve
C)price level will increase
D)price level will definitely decrease

Question

Quizplus · Accepted Answer

If there is an excess demand situation in the economy, it means that there is more demand for goods and services at the current price level than there is supply. This puts upward pressure on prices as consumers bid up the price in order to secure their desired goods and services. Therefore, the price level will increase in such a situation.

If There Is an Excess Demand Situation in the Economy