A rise in aggregate demand and a rise in short-run aggregate supply will definitely
A) raise the price level, but there is not enough information to know how Real GDP will change.
B) lower Real GDP, but there is not enough information to know how the price level will change.
C) raise the price level and Real GDP.
D) raise Real GDP, but there is not enough information to know how the price level will change.
E) raise the price level and lower Real GDP.

Question

Quizplus · Accepted Answer

A rise in aggregate demand increases Real GDP and the price level, while a rise in short-run aggregate supply increases Real GDP and decreases the price level. The net effect on the price level is uncertain, but Real GDP will definitely rise.

A Rise in Aggregate Demand and a Rise in Short-Run