If There Is an Unanticipated Increase in Aggregate Demand, Then

question 52

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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