Suppose the aggregate demand curve shifts rightward against an upward-sloping 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

When the aggregate demand curve shifts rightward against an upward-sloping short-run aggregate supply curve, Real GDP increases while the price level also increases. This is because the increase in AD results in a greater quantity of output being produced in the short run (as firms increase production to meet the higher demand), leading to an increase in Real GDP. However, as firms increase production, they also experience higher costs of production (due to resource scarcity), which leads to an increase in prices (i.e., higher inflation).

Suppose the Aggregate Demand Curve Shifts Rightward Against an Upward-Sloping