Suppose aggregate demand increases by more than expected. Which of the following describes what will occur?
A)Real GDP will be greater than potential GDP.
B)Unemployment will fall.
C)The price level will increase.
D)All of the above answers are correct.

Question

Quizplus · Accepted Answer

When aggregate demand increases more than expected, real GDP can exceed potential GDP, unemployment tends to fall as more workers are needed to meet demand, and the price level often rises due to increased demand pressures.

Suppose Aggregate Demand Increases by More Than Expected