An increase in aggregate demand when the economy is operating ________ is likely to result in an increase in the overall price level and ________ in output.
A) below full capacity; a decrease
B) below full capacity; no increase
C) at full capacity; a decrease
D) at full capacity; no increase

Question

Quizplus · Accepted Answer

When the economy is at full capacity, an increase in aggregate demand leads to higher prices but not an increase in output, as resources are already fully utilized.

An Increase in Aggregate Demand When the Economy Is Operating