Refer to Figure 6.1. Assume that L1 represents the budget line before a price change. Which change in budget lines represents compensation?

The quantity of real GDP demanded on the AD curve is the equilibrium real GDP when

A) equilibrium expenditure is greater than real GDP. B) aggregate planned expenditure equals real GDP. C) the price level equals the equilibrium price level. D) aggregate planned expenditure is greater than real GDP. E) aggregate planned expenditure is less than real GDP.

In the Classical model, an increase in aggregate demand leads to __________ real GDP and __________ price level

A) an unchanged; an unchanged B) a rising; an unchanged C) a rising; a rising D) an unchanged; a rising