Suppose consumers spend more than usual. In the short run, prices will _____; in the long run, prices will _____ from its starting point.
A) increase; remain unchanged
B) increase; increase
C) remain unchanged; decrease
D) remain unchanged; increase

Question

Quizplus · Accepted Answer

In the short run, increased consumer spending leads to higher demand, causing prices to increase. In the long run, persistent higher demand can lead to sustained price increases due to inflationary pressures.

Suppose Consumers Spend More Than Usual