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

Question

Quizplus · Accepted Answer

An increase in aggregate demand means there is more demand for goods and services in the economy. This will lead firms to increase their production to meet the demand. To increase production, firms will need to hire more workers, leading to an increase in employment. However, firms may not immediately cut prices in response to an increase in aggregate demand, as they may be able to sell more output at higher prices.

An Increase in Aggregate Demand Will Initially Tend to Lead