For a given level of inflation, if bright prospects for the future of the economy cause businesses to increase their spending on new capital, then the _____ shifts _____.
A)aggregate demand curve; right
B)aggregate demand curve; left
C)short-run aggregate supply line; upward
D)short-run aggregate supply line; downward

Question

Quizplus · Accepted Answer

When businesses increase their spending on new capital due to positive prospects for the economy's future, it leads to an increase in demand for goods and services in the short run, causing the aggregate demand curve to shift rightward. This results in higher output and prices in the short run as the economy moves along the short-run aggregate supply curve. Therefore, option A is the correct answer.

For a Given Level of Inflation, If Bright Prospects for the Future