If the aggregate demand curve shifts rightward,
A)the price level increases and output decreases
B)the resulting increase in the price level is usually called cost-push inflation
C)the resulting increase in the price level is usually called demand-pull inflation
D)the price level increases only if there is also a leftward shift of the aggregate supply curve
E)the price level decreases and output decreases

Question

Quizplus · Accepted Answer

When the aggregate demand curve shifts rightward, it leads to an increase in both the price level and output. The resulting increase in the price level is usually called demand-pull inflation as it is caused by an increase in aggregate demand. Therefore, option C is the correct answer. Options A, B, D, and E are incorrect as they provide either partially correct or entirely wrong statements about the impact of a rightward shift in the aggregate demand curve.

If the Aggregate Demand Curve Shifts Rightward