Exhibit 10-4 Aggregate supply and demand curves As the economy moves to the right from E₁ to E₂ in Exhibit 10-4 along the upward-sloping aggregate supply curve the: A) unemployment rate rises. B) unemployment rate falls. C) inflation rate falls. D) full employment GDP is realized.

Question

Quizplus · Accepted Answer

As the economy moves to the right along the aggregate supply curve, the unemployment rate falls and output increases. This is because firms are hiring more workers and producing more goods and services, resulting in a lower unemployment rate. However, there may be some inflationary pressures in the short run as demand exceeds supply, but in the long run, the economy will move towards full employment GDP.

Exhibit 10-4 Aggregate Supply and Demand Curves