Which of the following would cause prices and real GDP to ri

Which of the following would cause prices and real GDP to rise in the short run?

A.Short-run aggregate supply shifts right.

B. Short-run aggregate supply shifts left.

C. Aggregate demand shifts right.

D. Aggregate demand shifts left.

Solution

Given the aggregate demand, if short-run aggregate supply shifts to the right then it results in fall in price level and rise in real GDP.

Given the aggregate demand, if short-run aggregate supply shifts to the left then it results in rise in price level and fall in real GDP.

Given the short-run aggregate supply, if aggegate demand shifts to the right then it results in rise in price level and rise in real GDP.

Given the short-run aggregate supply, if aggegate demand shifts to the left then it results in fall in price level and fall in real GDP.

As we can see that both price level and real GDP rise when aggregate demand shifts to the right.

Hence, the correct answer is option (C).