If There Is an Unanticipated Increase in Aggregate Demand, Then

question 100

Multiple Choice

If there is an unanticipated increase in aggregate demand, then according to new classical economics, the economy will self-correct with a(n)

• A) decrease in short-run aggregate supply, so output returns to its initial level but the price level rises.
• B) decrease in short-run aggregate supply, so output increases and the price level rises.
• C) decrease in short-run aggregate supply, so output returns to its initial level and the price level falls.
• D) increase in short-run aggregate supply, so output increases and the price level rises.

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Definitions:

Students

Individuals engaged in the pursuit of learning, typically within an educational institution such as a school or university.

Income Increased

A situation where an individual, household, or entity's earnings or revenue rise, impacting their economic capacity and consumption decisions.

Industries

Broad categories that group businesses and economic activities based on similar production processes, services, or goods produced.

Economy

The system of production, distribution, and consumption of goods and services within a particular geographic region.