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 but the same real GDP.
B) a higher price level and a higher level of real GDP.
C) the same price level and a lower level of real GDP.
D) None of the above answers are correct.

Question

Quizplus · Accepted Answer

In the long-run, an increase in aggregate demand without an increase in the money supply leads to a higher price level while real GDP returns to its natural level, due to the economy's self-correcting mechanism.

An Initial Increase in Aggregate Demand That Is NOT Followed