Beginning from a position of long-run equilibrium, suppose there is an increase in the aggregate demand curve. After adjustment and comparing the economy's new long-run equilibrium with its original long-run position, the result would be an increase in:
A) real GDP.
B) the price level (CPI).
C) the unemployment rate.
D) a and b, but not c.

Question

Quizplus · Accepted Answer

In the long run, an increase in aggregate demand leads to a higher price level, but real GDP returns to its original level due to the economy's self-correcting mechanism. Unemployment remains unchanged in the long run.

Beginning from a Position of Long-Run Equilibrium, Suppose There Is