An initial increase in aggregate demand that is NOT followed by an increase in the quantity of money results in a long-run equilibrium with
A) a higher price level and an increased level of real GDP.
B) the same price level and a lower level of real GDP.
C) a higher price level but the same real GDP.
D) None of the above answers are correct.

Question

Quizplus · Accepted Answer

In the long run, without an increase in the money supply, the economy adjusts back to its potential output, resulting in a higher price level but the same real GDP due to the self-correcting nature of the economy.

An Initial Increase in Aggregate Demand That Is NOT Followed