In the long-run persistent increases in aggregate demand will:
A)result in stagflation
B)eliminate structural unemployment
C)result in inflation with no changes in real GDP
D)result in shifts of the long-run aggregate supply curve to the right

Question

Quizplus · Accepted Answer

In the long-run, persistent increases in aggregate demand will cause firms to increase prices and output, but full employment will be reached, and real GDP will remain at its potential level. As a result, prices will increase, leading to inflation, but there will be no changes in real GDP.

In the Long-Run Persistent Increases in Aggregate Demand Will