-Refer to the above figure. An increase in aggregate demand between real Gross Domestic Product (GDP) levels Y₀ and Y₁ A) would most likely result in some inflation. B) would not increase output since the economy is already working at full capacity. C) would have no effect on the price level. D) would cause price levels to fall.

Question

Quizplus · Accepted Answer

An increase in aggregate demand between GDP levels Y₀ and Y₁ would likely result in some inflation because the economy is moving towards full capacity, causing upward pressure on prices.

-Refer to the Above Figure