Suppose you were to observe an increase in real GDP with no change in the price level. If you held the long-run perspective of no trade-offs between inflation and unemployment, you could explain your observation only in terms of
A) a simultaneous reduction in aggregate demand and potential GDP.
B) an increase in aggregate demand alone.
C) an increase in potential GDP with no change in aggregate demand.
D) a simultaneous increase in aggregate demand and potential GDP.
E) an increase in aggregate demand accompanied by a reduction in potential GDP.
Correct Answer:
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