The Following Questions Refer to the graph below.
-Given D⁰ and S⁰,an increase in aggregate demand would lead to which of the following?

Question

The Following Questions Refer to the graph below. -Given D⁰ and S⁰,an increase in aggregate demand would lead to which of the following?

Quizplus · Accepted Answer

From the graph, we can see that an increase in aggregate demand leads to a shift from point A to point B, which corresponds to an increase in both price level (P0 to P1) and real GDP (Y0 to Y1). As the economy moves closer to full employment, demand for goods and services exceeds supply, leading to higher prices (inflation). Therefore, the correct answer is C.

The Following Questions Refer to the Graph Below