Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment.Which of the following will happen in the short run?

Question

Quizplus · Accepted Answer

When firms become more optimistic about future profitability, they are likely to invest more, increasing aggregate demand. This can lead to higher output and employment in the short run, reducing unemployment.

Suppose the Economy Is at Full Employment and Firms Become