Along the short-run aggregate supply curve (SRAS), an increase (rightward shift) in the aggregate demand curve will increase:
A) both the price level and real GDP.
B) real GDP without raising the price level.
C) the price level without affecting real GDP.
D) the price level but reduce real GDP.

Question

​ Along the short-run aggregate supply curve (SRAS), an increase (rightward shift) in the aggregate demand curve will increase:
A) ​both the price level and real GDP.
B) real GDP without raising the price level.
C) the price level without affecting real GDP.
D) ​the price level but reduce real GDP.

Quizplus · Accepted Answer

Along the short-run aggregate supply curve, an increase in aggregate demand will result in both an increase in the price level and an increase in real GDP. This is due to the fact that in the short run, input prices are fixed, so an increase in aggregate demand can lead to an increase in output without increasing production costs.

​ Along the Short-Run Aggregate Supply Curve (SRAS), an Increase

Along the Short-Run Aggregate Supply Curve (SRAS), an Increase