In the short run, if aggregate demand increases, what happens to output prices relative to input prices?
A)They rise.
B)They decline or stay the same.
C)They may rise or decline.
D)They do not change.

Question

Quizplus · Accepted Answer

In the short run, if aggregate demand increases, output prices tend to rise faster than input prices due to the immediate pressure on demand, leading to higher selling prices for goods and services while input costs adjust more slowly.

In the Short Run, If Aggregate Demand Increases, What Happens