Suppose that the current price level is 110, real GDP is $100 billion, and long-run aggregate supply is $95 billion. We can conclude that
A) the price level will fall and input prices will rise until real GDP pulls long-run aggregate supply up to $100 billion.
B) aggregate demand will increase until both short-run and long-run aggregate supply equal $100 billion.
C) the price level will fall until long-run aggregate supply shifts to $100 billion.
D) input prices will rise until real GDP is $95 billion.
D
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A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease
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