Final answer:
An increase in aggregate demand with constant aggregate supply results in a higher price level. This increase is due to various factors influencing total spending, rather than individual goods becoming cheaper.
Step-by-step explanation:
An increase in aggregate demand assuming constant aggregate supply will result in an increase in price level. This can be explained using supply and demand analysis. When the aggregate demand curve shifts to the right, and the aggregate supply remains constant, the equilibrium price level increases. The aggregate demand curve aggregates the demand across all goods and services in an economy, and an increase in aggregate demand could be due to various factors, such as increased consumer confidence, government spending, or lower interest rates, leading to more spending and investment but not necessarily because individual goods are cheaper.
Factors influencing total spending in the economy include consumer confidence, investment levels, government policy, and foreign demand for a country's exports. These factors can increase total spending without the price of goods decreasing.