Unanticipated Increase in Aggregate Demand: Effects on Equilibrium Output | Goods and Services Market

Unanticipated Increase in Aggregate Demand and Equilibrium Output

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How will an unanticipated increase in aggregate demand emanating from an increase in business and consumer optimism influence equilibrium output in the goods and services market?

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A. B. C. D.

C

Optimism concerning the future direction of the economy will stimulate investment. Investment today may be necessary in order to benefit fully from future opportunities. This will cause aggregate demand to rise; in response, output will rise as will prices (due to increased competition for output and resources).

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