After a shift in the aggregate demand curve,which variable adjusts to restore general equilibrium?
A)price level
B)real interest rate
C)consumption spending
D)investment spending

Question

Quizplus · Accepted Answer

After a shift in the aggregate demand curve, there would be an imbalance between the aggregate demand and supply. Therefore, the price level would adjust to restore general equilibrium by bringing the two curves back into balance. As prices rise, firms would increase their output to meet the higher demand, leading to a movement along the supply curve. Eventually, the two curves would intersect again at a new equilibrium point with a higher price level and a higher level of output. Real interest rates, consumption spending, and investment spending may all be affected by changes in aggregate demand, but they would not directly restore general equilibrium.

After a Shift in the Aggregate Demand Curve,which Variable Adjusts