Along the horizontal range of the aggregate supply curve, an increase in the aggregate demand curve will increase:
A) both the price level and real GDP.
B) only real GDP.
C) only the price level.
D) real GDP and reduce the price level.

Question

Quizplus · Accepted Answer

In the horizontal range of the aggregate supply curve, the economy is not at full capacity, meaning that increases in aggregate demand can be met with increases in production without affecting the price level. Thus, only real GDP increases.

Along the Horizontal Range of the Aggregate Supply Curve, an Increase