Under a fixed exchange rate system, if the inflation rate of the United States exceeds the inflation rate of other nations, the

Which of the following will most likely occur in the short run if long-run equilibrium is disturbed by an unanticipated decrease in aggregate demand?

a. a decrease in output and a higher price level b. an increase in output and a higher price level c. a decrease in output and a lower price level d. an increase in output, while prices remain unchanged

An increase in the consumption of a good resulting from a reduction in price that makes the good cheaper in relation to other goods is called the

a. substitution effect. b. income effect. c. real balance effect. d. inelasticity effect.