An increase in aggregate demand, all other things unchanged, in the long run will generate
A) an increase in potential output and no change in the price level.
B) a decrease in potential output and no change in the price level.
C) no change in potential output and an increase in the price level.
D) no change in potential output and a decrease in the price level.

Question

Quizplus · Accepted Answer

In the long run, an increase in aggregate demand leads to higher price levels (inflation) but does not change potential output, as the economy is operating at full capacity.

An Increase in Aggregate Demand, All Other Things Unchanged, in the Long