Question

Since the end of World War I, the U.S. has almost always had rising prices and an upward trend in real GDP To explain this

a. both aggregate demand and long-run aggregate supply must be shifting right and aggregate demand must be shifting farther
b. it is only necessary that long-run aggregate supply shifts right over time.
c. it is only necessary that aggregate demand shifts right over time.
d. None of the above cases would produce rising prices and growing real GDP over time

Answer 1

a. both aggregate demand and long-run aggregate supply must be shifting right, and aggregate demand must be shifting farther

Step-by-step explanation:

The statement that best explains rising prices and an upward trend in real GDP is that "both aggregate demand and long-run aggregate supply must be shifting right and aggregate demand must be shifting farther."

The long-run aggregate supply shift to the right shows rising prices over the years. This is true because the higher the cost of commodities, the higher the quantity supplied.

Also, the farther shift of the aggregate demand shows there is an upward trend in real GDP. This is also true because upwards in GDP shows an increase in wages and thereby leading to the rise in demands.