An economic expansion caused by a shift in aggregate demand causes prices to
A)rise in the short run,and rise even more in the long run.
B)rise in the short run,and fall back to their original level in the long run.
C)fall in the short run,and fall even more in the long run.
D)fall in the short run,and rise back to their original level in the long run.

Question

Quizplus · Accepted Answer

In the short run, an increase in aggregate demand leads to a temporary shortage of goods and services, causing prices to rise. However, in the long run, businesses will increase production to meet the higher demand, and the economy will reach full capacity. At this point, the increased demand will lead to higher prices in the long run. So, prices will rise in the short run and rise even more in the long run.

An Economic Expansion Caused by a Shift in Aggregate Demand