Economics Aggregate Demand And Supply Questions
When aggregate demand exceeds aggregate supply, it leads to a situation of excess demand or a demand-pull inflation. This means that the total demand for goods and services in the economy is higher than the total supply available. As a result, prices tend to rise as businesses increase their prices to meet the higher demand. Additionally, there may be shortages of goods and services, leading to long waiting times or unfulfilled orders. In the long run, this imbalance can lead to an increase in production and investment as businesses try to meet the higher demand, which can help restore equilibrium between aggregate demand and supply.