There is ________ relationship between the price level and the level of aggregate output when both aggregate supply and aggregate demand are changing simultaneously.

Question

Quizplus · Accepted Answer

When both aggregate supply and aggregate demand are changing simultaneously, there is no systematic relationship between the price level and the level of output. This is because both factors can move in different directions, resulting in a variety of outcomes. For example, an increase in aggregate demand could cause an increase in both price level and output, or it could cause a decrease in output if the aggregate supply cannot keep up with the demand. Similarly, a decrease in aggregate supply could cause an increase in price level and a decrease in output, or it could cause no change in output if the aggregate demand also decreases. Therefore, we cannot determine a clear positive or negative relationship between the two variables in this situation.

There Is ________ Relationship Between the Price Level and the Level