uestion 11 (0.75 points) If there is an unanticipated increase in aggregate dema

Question

uestion 11 (0.75 points) If there is an unanticipated increase in aggregate demand, then according to new classical economics, the economy will self-correct with aln): 1) Decrease in short-run aggregate supply, so output returns to its initial level, but the 2) Decrease in short-run aggregate supply, so output increases and the price level rises 3) Decrease in short-run aggregate supply, so output returns to its initial level and the 4) Increaseo short-run aggregate supply, so output increases and the price level rises price level rises price level falls Save

Explanation / Answer

Correct choice is option one. when there is an unanticipated increase in the aggregate demand the aggregate demand curve will shift to the right and it will increase the output and the price level in the short run. In the long run the short run supply curve will shift to the left and it will increase the price level and decrease the output so that output returns to its original long run level.

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