Asked by Jacob Cadavid on May 31, 2024
Verified
When monetary and fiscal policymakers expand aggregate demand, which of the following costs to the economy is incurred in the short run?
A) Short-run aggregate supply decreases.
B) The natural rate of unemployment increases.
C) The price level increases.
D) The money supply decreases.
Aggregate Demand
Aggregate request for products and services in an economy, measured at a particular general price level throughout a defined time interval.
Price Level
The average of current prices across the entire spectrum of goods and services produced in the economy, reflecting inflation or deflation.
Short-Run Aggregate Supply
A curve that shows the relationship in the short term between the price level and the quantity of output provided by firms when some input prices, especially wages, are fixed.
- Describe the consequences of central bank actions on inflation and unemployment figures, including the pivotal role played by future expectations.
Verified Answer
ZK
Zybrea KnightJun 04, 2024
Final Answer :
C
Explanation :
When monetary and fiscal policymakers expand aggregate demand, it typically leads to an increase in the price level in the short run. This is because the increased demand for goods and services tends to push prices up, especially if the economy is near or at full capacity.
Learning Objectives
- Describe the consequences of central bank actions on inflation and unemployment figures, including the pivotal role played by future expectations.