Plzzz help me on this equilibrium and aggregate demand increase question?

Question

Suppose that the economy is in long-run macroeconomic equilibrium and aggregate demand increases. As the economy moves to short-run macroeconomics equilibrium, there is:

A) a recessionary gap with high inflation.

B) a recessionary gap with high inflation.

C) an inflationary gap with high unemployment.

D) an inflationary gap with low unemployment.

Answer 1

D) an inflationary gap with low unemployment.

Answer 2

The answer is D.  Here is why:

The setup of the problem assumes that we are producing just enough to fill the current aggregate demand.  Now if demand increases, it will outpace supply.  This will cause the price of goods to rise.  While supply is racing to catch up, there will be less unemployment while producers struggle to make more goods to meet the increased demand.