An unexpected outward shift of the economy's AD curve will cause real GDP growth to increase in:
A) the short run only.
B) the long run only.
C) both the short run and the long run.
D) neither the short run nor the long run.

Question

Quizplus · Accepted Answer

In the short run, an unexpected outward shift of the Aggregate Demand (AD) curve can lead to an increase in real GDP growth as prices may not immediately adjust, allowing for higher output and employment. In the long run, prices adjust to the new level of demand, potentially neutralizing the initial increase in real GDP growth.

An Unexpected Outward Shift of the Economy's AD Curve Will