True or false: An increase in aggregate demand along the flat portion of the short-run aggregate supply curve will result in an increase in the price level without much effect on real output.

Question

True false question.
True
False

Answer 1

False.

An increase in aggregate demand along the flat portion of the short-run aggregate supply curve typically leads to an increase in real output rather than just an increase in the price level. The flat portion of the short-run aggregate supply curve indicates that the economy has unused resources, so an increase in aggregate demand can result in higher output with little to no rise in the price level.