An Unexpected Increase in Aggregate Demand

question 200

Multiple Choice

An unexpected increase in aggregate demand

• A) will reduce the price level.
• B) will increase the average duration of unemployment.
• C) will reduce the unemployment rate.
• D) will increase real GDP, but will not affect the rate and duration of unemployment.

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Definitions:

Socially Optimal Quantity

Socially Optimal Quantity is the level of production or consumption of a good or service that results in the maximum possible economic efficiency and welfare, taking into account all social costs and benefits.

External Benefit

A positive effect or advantage that results from a product or service's use, extending beyond the direct buyer or consumer to others not involved in the transaction.

Output

The cumulative production of goods and services by an economy over a given time frame.

External Cost

Costs of a transaction or activity that affect people other than those directly involved in the transaction, often not reflected in the market prices.