📚 Learning Guide
Aggregate Supply and Demand Analysis
easy

If aggregate demand increases while aggregate supply remains constant, it will always lead to an increase in both the equilibrium price level and output in the economy.

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Learning Path
Learning Path

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A

True

B

False

Understanding the Answer

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Answer

When aggregate demand increases, it means that people and businesses want to buy more goods and services at every price level. If aggregate supply stays the same, there aren't more goods available to meet this higher demand. As a result, sellers can raise their prices because more buyers are competing for the same amount of products. This leads to a higher equilibrium price level in the economy. For example, if a popular toy becomes very desirable during the holiday season, more people will want to buy it, pushing up its price while the number of toys produced remains unchanged.

Detailed Explanation

When demand goes up but supply stays the same, prices usually rise. Other options are incorrect because Some might think that higher demand always means more output.

Key Concepts

Aggregate Demand
Equilibrium Price Level
Aggregate Supply
Topic

Aggregate Supply and Demand Analysis

Difficulty

easy level question

Cognitive Level

understand

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