According to classical macroeconomic theory, an increase in aggregate demand will _____ in the long run.
A)only raise the inflation rate
B)increase both output and the inflation rate
C)only reduce the inflation rate
D)decrease both output and the inflation

Question

Quizplus · Accepted Answer

According to classical macroeconomic theory, in the long run, an increase in aggregate demand is believed to only raise the inflation rate, as output is determined by supply-side factors (like technology and resources) and is considered to be at its natural level in the long run.

According to Classical Macroeconomic Theory, an Increase in Aggregate Demand