Suppose the aggregate demand curve shifts rightward against a horizontal short-run aggregate supply curve.Real GDP would ________ while the price level ________.
A)remain unchanged,rises
B)rise,rises
C)remain unchanged,falls
D)rise,remain unchanged
E)fall,rises

Question

Quizplus · Accepted Answer

With a horizontal short-run aggregate supply curve, an increase in aggregate demand leads to an increase in real GDP while the price level remains unchanged. This is because the horizontal supply curve indicates that the economy can produce more without increasing prices, typically representing a situation of significant underutilized resources.

Suppose the Aggregate Demand Curve Shifts Rightward Against a Horizontal