When aggregate demand shifts rightward along the short-run aggregate-supply curve,inflation
A)increases and unemployment increases.
B)increases and unemployment decreases.
C)decreases and unemployment increases.
D)decreases and unemployment decreases.

Question

Quizplus · Accepted Answer

When aggregate demand shifts rightward along the short-run aggregate-supply curve, there is an increase in both output and prices. This is because firms increase production to meet the increased demand, leading to a decrease in unemployment. However, the increase in demand also creates upward pressure on prices, resulting in inflation. Therefore, the best option is B as it correctly states that inflation increases and unemployment decreases.

When Aggregate Demand Shifts Rightward Along the Short-Run Aggregate-Supply Curve,inflation