When aggregate demand exceeds the full-employment level of output,the result is:
A) Significant unemployment.
B) Higher inventory levels.
C) A higher average price level.
D) A recession.

Question

Quizplus · Accepted Answer

When aggregate demand exceeds the full-employment level of output, it creates excess demand for goods and services. This leads to a shortage of supply and a higher average price level, or inflation. A, B, and D are incorrect as they do not accurately reflect the consequences of excess demand.

When Aggregate Demand Exceeds the Full-Employment Level of Output,the Result