Final answer:
In the short run, with a worldwide increase in income and wealth, output in the United States is expected to increase and the price level to rise due to higher demand for U.S. exports, leading to a rightward shift in Aggregate Demand (AD).
Step-by-step explanation:
Worldwide, an increase in income and wealth generally leads to a higher demand for goods and services, including those exported by the United States. In the short run, one can expect output in the United States to increase due to higher demand for U.S. exports. Consequently, the price level is also expected to increase because an increase in aggregate demand tends to push prices upward, reflecting higher consumer spending power and possibly leading to inflationary pressures.
Increased demand from abroad can lead to a rightward shift in the Aggregate Demand (AD), resulting in a greater Gross Domestic Product (GDP) and a rise in the price level. Such a surge in GDP often necessitates more employment opportunities to meet production needs, decreasing the trade deficit. However, if there is tight monetary policy in place to counteract inflation, it could also potentially lead to a recession.