An increase in aggregate demand will increase the economy's real output and price level if the aggregate supply curve is
A) horizontal
B) downward sloping
C) upward sloping
D) vertical

Question

Quizplus · Accepted Answer

When the aggregate supply curve is upward sloping, an increase in aggregate demand will increase both the economy's real output and price level. This is because, with an upward sloping aggregate supply curve, as demand increases, prices tend to rise due to the increased cost of production and scarcity of resources, and output increases as producers are willing to supply more at higher prices.

An Increase in Aggregate Demand Will Increase the Economy's Real