If aggregate demand increases and as a result equilibrium real GDP and employment increase but the price level remains unchanged,we can assume that the aggregate demand curve

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Quizplus · Accepted Answer

If equilibrium real GDP and employment increase but the price level remains unchanged, it suggests that there is excess capacity in the economy. This can only happen when the aggregate supply curve intersects a horizontal segment, indicating that the economy can produce more output without triggering inflation. Therefore, the aggregate demand curve intersects a horizontal segment of the aggregate supply curve.

If Aggregate Demand Increases and as a Result Equilibrium Real