An increase in aggregate demand will initially tend to lead firms to
A)increase production.
B)decrease employment.
C)cut prices.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

An increase in aggregate demand means that consumers are willing to spend more money, which creates more demand for goods and services. In order to meet this increased demand, firms will need to increase their production to keep up with the demand. This would not necessarily lead to a decrease in employment or the need to cut prices.

An Increase in Aggregate Demand Will Initially Tend to Lead