An unexpected increase in aggregate demand causes
A) the unemployment rate to fall, with no change in the price level.
B) the price level to rise, but the duration of unemployment will remain constant, so the unemployment rate remains constant.
C) simultaneously the price level to rise and the unemployment rate to fall.
D) simultaneously the price level to fall and the unemployment rate to fall.

Question

Quizplus · Accepted Answer

An unexpected increase in aggregate demand will cause an increase in both output and price level. As output increases, firms demand more labor, leading to a decrease in the unemployment rate. Therefore, both the price level and the unemployment rate will fall simultaneously.

An Unexpected Increase in Aggregate Demand Causes