Question

If AD increases, which of the following will result? a. an increase in output and an increase in the price level.b. an increase in output and a decrease in the price level.c. a decrease in output and an increase in the price level.d. a decrease in output and a decrease in the price level.

Answer 1

a. an increase in output and an increase in the price level.

Step-by-step explanation:

If Aggregate Demand increases, this will result in an increase in output and an increase in the price because short run aggregate demand measures total output for a single nominal price level

In the long-run, increases in aggregate demand cause the price of a good or service to increase. When the demand increases the aggregate demand curve shifts to the right.

Also, increased demand for a product in the long run will lead to increased output being supplied.

The aggregate supply determines the extent to which the aggregate demand increases the output and prices of a good or service.