Which of the following statements concerning the long-run aggregate demand and supply model is true?
A) An increase in aggregate demand increases real GDP only temporarily.
B) An increase in aggregate demand increases real GDP by a multiple of the initial increase in expenditures.
C) Prices are fixed.
D) Output change that results from a change in aggregate demand is a permanent effect.
E) A change in aggregate demand leads to a permanent change of higher output.

Question

Quizplus · Accepted Answer

In the long-run aggregate demand and supply model, an increase in aggregate demand can lead to a temporary increase in real GDP, but in the long run, the economy tends to return to its potential output level as prices adjust.

Which of the Following Statements Concerning the Long-Run Aggregate Demand