If policymakers expand aggregate demand, then in the long run
A)prices will be higher and unemployment will be lower.
B)prices will be higher and unemployment will be unchanged.
C)prices and unemployment will be unchanged.
D)prices will be lower and unemployment will be higher.

Question

Quizplus · Accepted Answer

In the long run, an expansion of aggregate demand typically results in higher price levels (inflation) as the economy adjusts, but the natural rate of unemployment remains unchanged due to adjustments in wages and prices. This is consistent with the long-run vertical aggregate supply curve in macroeconomic models.

If Policymakers Expand Aggregate Demand, Then in the Long Run