Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It typically results in lower unemployment rates.
B
It causes inflation to rise due to increased demand.
C
It leads to a decrease in the overall price level.
D
It may cause a temporary increase in inflation while reducing unemployment.
E
It results in a long-term increase in unemployment.
Understanding the Answer
Let's break down why this is correct
Answer
When aggregate demand shifts to the right, it means that people and businesses want to buy more goods and services. This increase in demand can lead to higher production levels, which often requires companies to hire more workers. As a result, unemployment tends to decrease because more jobs are created to meet this higher demand. However, as more money is spent and the economy heats up, prices may rise, leading to inflation. For example, if a new technology becomes popular, more people will want to buy it, causing companies to hire more staff while also raising prices due to increased demand.
Detailed Explanation
A rightward shift in aggregate demand usually leads to higher inflation and lower unemployment in the short term. Other options are incorrect because This option suggests that unemployment rates go down; This option says inflation rises due to increased demand.
Key Concepts
Aggregate Demand
Unemployment
Inflation
Topic
Aggregate Demand and Supply Shifts
Difficulty
medium level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.