An increase in aggregate demand causes an increase in ________ only in the short run,but causes an increase in ________ in both the short run and the long run.
A)the price level; real GDP
B)real GDP; real GDP
C)the price level; the price level
D)real GDP; the price level

Question

Quizplus · Accepted Answer

In the short run, an increase in aggregate demand can lead to higher real GDP as resources are utilized more fully. However, in the long run, the economy tends to return to its potential output, and the primary effect of increased aggregate demand is a higher price level (inflation).

An Increase in Aggregate Demand Causes an Increase in ________