Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The equilibrium price decreases
B
The equilibrium price remains unchanged
C
The equilibrium price increases
D
The equilibrium price fluctuates randomly
Understanding the Answer
Let's break down why this is correct
Answer
When aggregate demand increases due to economic growth, it means that more people and businesses want to buy goods and services. This higher demand can lead to a situation where there are not enough products available to meet everyone's needs, which causes prices to rise. For example, if a new technology becomes popular and everyone wants the latest gadget, the manufacturers may struggle to keep up with the demand, leading them to increase prices. As prices go up, the market reaches a new equilibrium where the quantity of goods supplied matches the higher quantity demanded at these new prices. Therefore, an increase in aggregate demand typically results in higher equilibrium prices in the market.
Detailed Explanation
When more people want to buy goods and services, sellers can raise prices. Other options are incorrect because Some might think that more demand means lower prices; It's a common mistake to think that demand changes don't affect prices.
Key Concepts
Equilibrium Price
Economic Growth
Topic
Aggregate Demand and Supply Shifts
Difficulty
medium level question
Cognitive Level
understand
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