Because of changes in the ________, the long-run effect of a $10 increase in investment on real GDP equals ________.
A) interest rate; zero
B) interest rate; $10
C) money wage rate and price level; zero
D) money wage rate and price level; $10

Question

Quizplus · Accepted Answer

In the long run, changes in the money wage rate and price level adjust to shifts in demand, such as an increase in investment, leading to no change in real GDP. This adjustment process is part of the classical view of the economy, where the long-run aggregate supply is vertical, and changes in demand do not affect the output level.

Because of Changes in the ________, the Long-Run Effect of a $10