In the short run, the point on the aggregate demand curve where an economy will end up depends on:
A)The money supply
B)The long-run rate of inflation
C)Potential output
D)The short-run aggregate supply curve

Question

Quizplus · Accepted Answer

In the short run, the point on the aggregate demand curve where an economy will end up depends on the short-run aggregate supply curve. This is because the short-run aggregate supply curve shows the relationship between the price level and the quantity of goods and services that firms are willing to supply in the short run. The intersection of the short-run aggregate supply curve and the aggregate demand curve determines the equilibrium price level and real GDP. Therefore, the short-run aggregate supply curve is the best choice for answering this question.

In the Short Run, the Point on the Aggregate Demand