Last year in the country of Union, the price level increased and real GDP increased. Such an outcome might have occurred because short-run aggregate supply ________ and aggregate demand ________.
A) decreased; decreased
B) increased; did not change
C) increased; decreased
D) did not change; increased

Question

Quizplus · Accepted Answer

The price level and real GDP both increasing suggest that aggregate demand increased, pushing the economy to a higher price level and expanding output. This scenario doesn't necessarily require a change in short-run aggregate supply, which can remain constant while demand shifts rightward.

Last Year in the Country of Union, the Price Level