Figure 7-6 -Refer to Figure 7-6. Suppose the economy is initially at A. Now suppose an increase in government purchases shifts the aggregate demand curve to AD₂. Which of the following is false about the economy after it adjusts to its new long-run equilibrium? A) Nominal wages increase. B) The price level rises to P_d. C) Firms employ more workers than in the short-run equilibrium. D) There is some frictional and structural unemployment.

Question

Quizplus · Accepted Answer

In the long-run equilibrium, the economy returns to the natural level of output, so firms do not employ more workers than in the short-run equilibrium.

Figure 7-6 -Refer to Figure 7-6. Suppose the Economy Is Initially at Is