An increase in aggregate demand if aggregate supply is totally inelastic will ?
Correct answer: A. increase price but not output
- A. increase price but not output
- B. increase output but not price
- C. increase output and price
- D. decrease output and price
Explanation
With totally inelastic aggregate supply, output is fixed regardless of aggregate demand. An increase in aggregate demand therefore raises the price level without increasing real output.
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About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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