If the economy is in long run equilibrium and aggregate demand increases, then in the short run
A) nothing happens because the economy is in long run equilibrium.
B) the price level rises and real GDP does not change.
C) real GDP increases and the price level does not change.
D) the price level rises and real GDP increases.
D
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Suppose there are two market structures: A and B. Market A is characterized by free entry and exit of firms and firms under this structure face a horizontal demand curve. Market B has only one seller. Identify the market structures
Comment on the pricing mechanism, long-run profitability, and social surplus under both market structures.
If the Ricardian equivalence proposition is correct, then
A) deficits harm future generations. B) deficits reduce investment spending. C) deficits stimulate the economy in the short run. D) all of the above E) none of the above