Many economists maintain that

Question

Quizplus · Accepted Answer

All three statements are true. A) is true because at low levels of real GDP, there are plenty of unemployed resources and therefore increasing aggregate demand will not cause prices to rise much. B) is true because at very high levels of real GDP, the economy may face bottlenecks and increasing aggregate demand will mainly cause prices to rise, not output. C) is true because when the economy is operating at less than full capacity, an increase in aggregate demand will lead to an increase in output. But when the economy is near full employment, an increase in aggregate demand will mostly lead to an increase in prices and not output.

Many Economists Maintain That