Starting from long-run equilibrium, an increase in aggregate demand will cause an increase in which of the following?
A)the price level
B)expectations
C)real wages
D)unemployment

Question

Quizplus · Accepted Answer

An increase in aggregate demand will cause an increase in the price level as there is higher demand for goods and services than supply in the market, leading to upward pressure on prices. Expectations may also increase, but it is not a direct result of the increase in aggregate demand. Real wages would only increase if there is an increase in productivity, which is not necessarily implied by an increase in aggregate demand. Unemployment could potentially decrease if firms increase production to meet the higher demand, but it is not a direct result of the increase in aggregate demand.

Starting from Long-Run Equilibrium, an Increase in Aggregate Demand Will