Question

An economic policy initiative results in the AD curve shifting to the right. As a result, ____________.
a. the price level will rise.
b. the price level will stay constant.
c. the price level will fall.
d. Real GDP will rise in the short run.
e. a and d

Answer 1

Answer:

Option E (a and d), is the right answer.

Explanation:

Option E is the correct answer because increasing aggregate demand results in increasing income, output, and employment. In an economy, when the aggregate demand increases, the price level also goes up. Due to the rise in aggregate demand the aggregate demand curve shifts rightwards. Consequently, it shows that there will be an increase in the gross domestic product in the short run. That is why option E is correct.