Answer to Question #338568 in Microeconomics for Unknown

Question

Which of the following statements is correct regarding the AD-AS model?

a. In the simple Keynesian model, prices are assumed to be variable.

O b. A decrease in aggregate demand is accompanied by a rise in total production and income.

O c. Higher unemployment accompanied by lower inflation rate is referred to as stagflation.

O d. A simultaneous increase in aggregate demand and a decrease in aggregate supply, will lead to an increase in the price level.

Answer 1

The right answer is "d"

A simultaneous increase in aggregate demand and a decrease in aggregate supply, will lead to an increase in the price level.