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Let Aggregate Demand Rise in a World Characterized by a Lucas

Question 3

Multiple Choice

Let aggregate demand rise in a world characterized by a Lucas aggregate supply curve where price level changes are accurately perceived. In that case, you expect to see


A) a large change in GDP coupled with a small increase in prices.
B) a large change in GDP coupled with a small reduction in prices.
C) a small change in GDP coupled with a large increase in prices.
D) a small change in GDP coupled with a small reduction in prices.
E) a small change in GDP coupled with a large reduction in prices.

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