When aggregate demand increases,what happens to prices and employment?
A) Prices will fall and unemployment will rise.
B) Prices and unemployment fall.
C) Prices and unemployment rise.
D) Prices will rise and unemployment will fall.

Question

Quizplus · Accepted Answer

When aggregate demand increases, it leads to an increase in demand for goods and services, resulting in an increase in production and sales. This, in turn, leads to an increase in employment levels as firms require more workers to meet the higher demand. With an increase in employment levels, there is more income available for consumers to spend, further increasing aggregate demand, which leads to higher prices. Therefore, when aggregate demand increases, prices tend to rise, and employment tends to increase.

When Aggregate Demand Increases,what Happens to Prices and Employment