A rightward shift in aggregate demand will cause an increase in output and price level if aggregate supply is
A)Upward-sloping to the right.
B)Vertical.
C)Downward-sloping to the right.

Question

Quizplus · Accepted Answer

If aggregate supply is upward-sloping to the right, a rightward shift in aggregate demand will cause an increase in both output and price level due to the availability of more resources and factors of production. However, if aggregate supply is vertical, any increase in aggregate demand will only result in an increase in the price level since the economy is already producing at maximum capacity. If aggregate supply is downward-sloping to the right, a rightward shift in aggregate demand could lead to an increase in output but a rise in prices may not be as significant.

A Rightward Shift in Aggregate Demand Will Cause an Increase