During economic recovery, an increase in aggregate demand often leads to a rise in price levels, which can cause the _____ to be negatively affected, influencing real interest rates and inflationary expectations.

During economic recovery, when people and businesses start spending more, the overall demand for goods and services increases. This increase in aggregate demand can push prices up because more people are competing to buy the same amount of products. As prices rise, it can negatively affect purchasing power, meaning that people can buy less with the same amount of money. For example, if a loaf of bread costs $2 one month and then rises to $3 the next month, consumers feel the impact because their money doesn't stretch as far. This situation can also influence real interest rates and inflationary expectations, as lenders and borrowers adjust their expectations based on rising prices.