Question
upstudy study bank question image url

A rightward shift in the aggregate demand curve is most likely to result in a. decrease in employment. b. inflation. c. deflation. d. recession.

Ask by Ortiz Brooks. in the United States
Feb 20,2025

Upstudy AI Solution

Tutor-Verified Answer

Answer

A rightward shift in the aggregate demand curve most likely results in inflation.

Solution

To analyze the effects of a rightward shift in the aggregate demand curve, let's break down the options: 1. **Rightward Shift in Aggregate Demand**: This indicates an increase in overall demand for goods and services in the economy. This can occur due to various factors such as increased consumer spending, government expenditure, or investment. 2. **Effects of Increased Aggregate Demand**: - **Employment**: Typically, an increase in demand leads to higher production, which often requires more labor, resulting in an increase in employment. - **Inflation**: When demand increases significantly, it can outpace supply, leading to higher prices, which is inflation. - **Deflation**: This is the opposite of inflation and is unlikely to occur with an increase in demand. - **Recession**: A recession is characterized by a decline in economic activity, which is not consistent with an increase in aggregate demand. Given this analysis, the most likely result of a rightward shift in the aggregate demand curve is: **b. inflation.**

Answered by UpStudy AI and reviewed by a Professional Tutor

error msg
Explain
Simplify this solution

Beyond the Answer

A rightward shift in the aggregate demand curve signals an increase in the total demand for goods and services in the economy. This often leads to higher consumption, increased investment, and government spending, which can push prices upward and create inflationary pressures as the economy operates closer to its production capacity. In real-world scenarios, policymakers often intervene in such instances. For example, central banks might consider adjusting interest rates to control inflation. If aggregate demand rises too quickly, the economy can overheat, leading to unsustainable growth. Balancing demand with supply becomes crucial to maintain economic stability and prevent inflation spikes.

Related Questions

Try Premium now!
Try Premium and ask Thoth AI unlimited math questions now!
Maybe later Go Premium
Study can be a real struggle
Why not UpStudy it?
Select your plan below
Premium

You can enjoy

Start now
  • Step-by-step explanations
  • 24/7 expert live tutors
  • Unlimited number of questions
  • No interruptions
  • Full access to Answer and Solution
  • Full Access to PDF Chat, UpStudy Chat, Browsing Chat
Basic

Totally free but limited

  • Limited Solution
Welcome to UpStudy!
Please sign in to continue the Thoth AI Chat journey
Continue with Email
Or continue with
By clicking “Sign in”, you agree to our Terms of Use & Privacy Policy