In the short run, changes in real GDP are primarily determined by changes in factor- utilization rates which, in turn, are due to changes in
A)aggregate demand only.
B)aggregate supply only.
C)aggregate supply because when firms increase prices they are then willing to produce more.
D)aggregate demand because increases in demand will lead to increases in output.
E)both aggregate demand and aggregate supply.

Question

Quizplus · Accepted Answer

Changes in real GDP in the short run are determined by both aggregate demand and aggregate supply. An increase in aggregate demand will lead to an increase in output, while an increase in aggregate supply due to changes in factor-utilization rates such as labor and capital, will also lead to an increase in output. Therefore, both aggregate demand and aggregate supply are important factors in determining changes in real GDP in the short run.

In the Short Run, Changes in Real GDP Are Primarily