In the short run a rightward shift in the aggregate demand c

In the short? run, a rightward shift in the aggregate demand curve will cause:

a. the inflation rate to rise and output to fall.

b. the inflation rate to rise and output to rise.

c. the inflation rate to fall and output to rise.

d. the inflation rate to fall and output to fall

In the long? run, a leftward shift in aggregate demand will cause

a. the inflation rate to fall and output to remain unchanged.

b. the inflation rate to fall and output to rise.

c. the inflation rate to rise and output to remain unchanged

d. the inflation rate to rise and output to rise.

Solution

A)In short run a rightward shift in the aggregate demand curve will cause the increase in price and increase in equilibrium quantity. Thus inflation rate will increase and output will rise. Thus ans is B

B) In the long run, Output will remains unchanged because in long run all factor of production are effeciently used and this will make output equal to potential output.

But due to leftward shift in aggregate demand the market price will fall and there will be decrease in price or may be inflation rate will decrease or fall.

Thus ans is A