Economic growth takes place
A) only when both aggregate demand and aggregate supply increase.
B) when aggregate supply increases.
C) when aggregate demand decreases.
D) only if the price level is constant or rising.

Question

Quizplus · Accepted Answer

Economic growth takes place when aggregate supply increases, as this leads to an increase in output and productivity. While an increase in aggregate demand may lead to short-term economic growth, sustained economic growth requires an increase in aggregate supply. Decreases in aggregate demand, on the other hand, can lead to economic contraction. The price level may rise or fall during periods of economic growth, so it is not a necessary condition for economic growth to take place.

Economic Growth Takes Place