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Suppose You Observe an Increase in Both GDP and Prices

Question 47

Multiple Choice

Suppose you observe an increase in both GDP and prices. If you hold to the long-run perspective of no trade-offs between inflation and unemployment, you can explain your observation


A) entirely in terms of a downward shift in aggregate demand.
B) entirely in terms of an upward shift in aggregate demand.
C) entirely in terms of a reduction in potential GDP.
D) entirely in terms of an increase in potential GDP.
E) only in terms of changes in both aggregate demand and potential GDP.

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