Multiple Choice
An increase in aggregate demand will cause which of the following in the short run, assuming the economy is operating below full employment?
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16. Aggregate Demand and Aggregate Supply Analysis
Aggregate Demand
Multiple Choice
Shifts in the aggregate-demand curve can cause fluctuations in which of the following?
A
the natural rate of unemployment
B
the money supply
C
the long-run growth rate of the economy
D
output and the price level
Verified step by step guidance1
Understand that the aggregate-demand (AD) curve represents the total quantity of goods and services demanded across all levels of an economy at different price levels.
Recognize that shifts in the AD curve affect the equilibrium output and price level in the short run because they change the total spending in the economy.
Recall that the natural rate of unemployment is determined by long-run factors such as labor market policies and technology, and is not directly affected by short-run demand fluctuations.
Note that the money supply is a monetary policy tool that can influence the AD curve but is not itself changed by shifts in aggregate demand.
Understand that the long-run growth rate of the economy depends on factors like productivity and capital accumulation, which are not directly influenced by short-run shifts in aggregate demand.
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