In the long run, how will an increase in aggregate demand affect price and output?
A) The price level will decrease, and the output level will decrease.
B) The price level will increase, and the output level will increase.
C) The price level will increase, and the output level will decrease.
D) The price level will increase, and the output level will remain the same.

Question

In the long run, how will an increase in aggregate demand affect price and output?  
A) The price level will decrease, and the output level will decrease. 
B) The price level will increase, and the output level will increase. 
C) The price level will increase, and the output level will decrease. 
D) The price level will increase, and the output level will remain the same.

Quizplus · Accepted Answer

In the long run, the economy is at full employment, so an increase in aggregate demand leads to higher prices but output remains at its natural level.

In the Long Run, How Will an Increase in Aggregate