Suppose aggregate demand increases by more than expected. Which of the following does not occur?
A)Real GDP is greater than potential GDP.
B)The price level rises.
C)Unemployment falls.
D)The natural unemployment rate does not change.
E)Stagflation occurs.

Question

Quizplus · Accepted Answer

Stagflation (a situation of both inflation and unemployment) is not necessarily a guaranteed outcome of an increase in aggregate demand. The other options are all possible outcomes of an unexpected increase in aggregate demand.

Suppose Aggregate Demand Increases by More Than Expected