What impact will an increase in aggregate demand have on real output?
A)It will not increase real output in either the short run or the long run.
B)It will increase real output in both the short run and long run.
C)It will increase real output only in the short run.
D)It will increase real output only in the long run.

Question

Quizplus · Accepted Answer

An increase in aggregate demand in the short run will lead to an increase in real output. However, if the increase in aggregate demand is sustained in the long run, it will cause an increase in prices, leading to a decrease in real output. Therefore, an increase in aggregate demand will only increase real output in the short run.

What Impact Will an Increase in Aggregate Demand Have on Real