The correct answer is false. An increase in aggregate demand will not increase GDP in the long and short run.
Within an economy, aggregate demand highlights the total amount of goods and services provided in an economy. It is important to mention that aggregate demand specifically points out the price level and the amount of money for the goods that are exchanged.
In an economy, if the aggregate demand increases, the equilibrium price level increases and not the GDP. It can be highlighted that when the price of the outputs increases, the aggregate demand falls, and aggregate supply on the other hand increases till an equilibrium condition is reached. In the majority of cases, when an increase in aggregate demand is noticed, the price level (equilibrium price level) also increases.
It can be concluded that the correct answer is false. An increase in aggregate demand will not increase GDP in the long and short run.
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