In the short run,if AD increases,the unemployment rate will
A)Rise,and the price level will rise.
B)Fall,and the price level will rise.
C)Rise,and the price level will fall.
D)Fall, and the price level will fall.

Question

Quizplus · Accepted Answer

According to the Philips curve, in the short run, there exists a trade-off between inflation and unemployment. If AD increases, it leads to an increase in output and a decrease in unemployment. However, this comes at the cost of higher price levels due to increased demand for goods and services. Therefore, the correct answer is option B- the unemployment rate will fall, and the price level will rise.

In the Short Run,if AD Increases,the Unemployment Rate Will