An increase in aggregate demand will generate _____ in real GDP and _____ in the price level in the short run.
A) an increase; an increase
B) an increase; no change
C) a decrease; no change
D) no change; an increase

Question

Quizplus · Accepted Answer

An increase in aggregate demand will result in an increase in the demand for goods and services, leading to an increase in real GDP in the short run. As a result of increased demand for goods and services, firms may increase prices to match the higher demand, leading to an increase in the price level. Therefore, an increase in aggregate demand will generate an increase in real GDP and an increase in the price level in the short run.

An Increase in Aggregate Demand Will Generate _____ in Real