The world goes into an expansion.Starting from a position of long- run equilibrium, what effect does this event have on Canada's economy in the short run?
A)Real GDP increases and the price level rises.
B)Real GDP decreases and the price level falls.
C)Real GDP increases and the price level falls.
D)Real GDP decreases and the price level rises.
E)There is no change in either real GDP or the price level.

Question

Quizplus · Accepted Answer

An expansion typically leads to an increase in economic activity. In the short run, this would result in an increase in real GDP as production rises to meet higher demand. The price level would also rise due to increased demand for goods and services, leading to inflationary pressures.

The World Goes into an Expansion