11.4 Consequences of Changes in Aggregate Demand

-Refer to the above figure. An increase in aggregate demand beyond real Gross Domestic Product (GDP)level Y₁ would result in

Question

11.4 Consequences of Changes in Aggregate Demand
 
-Refer to the above figure. An increase in aggregate demand beyond real Gross Domestic Product (GDP)level Y₁ would result in

Quizplus · Accepted Answer

According to the graph, an increase in aggregate demand beyond real GDP level Y₁ would result in a higher price level but no change in real GDP. This is because the economy has already reached its full capacity at Y₁, so any further increase in demand cannot be met by an increase in production, leading to higher prices instead.