When ________, the price level rises, inventories decrease and firms respond by increasing output and employment.

Question

Quizplus · Accepted Answer

When aggregate demand increases, it means that consumers are willing to buy more goods and services at each price level. This leads to higher prices (price level rises), lower inventories (as more goods are sold), and firms respond by increasing production (output) and hiring more workers (employment) to meet the higher demand.

When ________, the Price Level Rises, Inventories Decrease and Firms