Growth in aggregate demand will

Question

Quizplus · Accepted Answer

When there is growth in aggregate demand, it creates pressure on the economy's resources and leads to increased output and employment in the short run. This shift to a higher point on the short-run Phillips curve indicates lower unemployment and higher inflation. Therefore, option C is the correct answer. Option A is incorrect, as deflation occurs when there is a decrease in aggregate demand. Option B is incorrect, as growth in aggregate demand is expected to increase employment. Option D is incorrect, as the short-run Phillips curve shifts to the right with the increased inflation.

Growth in Aggregate Demand Will