In the long-run ISLM model and with everything else held constant,as long as the level of output ________ the natural rate level,the price level will continue to ________,shifting the LM curve to the ________,until finally output is back at the natural rate level.
A)exceeds;rise;right
B)exceeds;rise;left
C)remains below;fall;left
D)remains below;rise;right

Question

Quizplus · Accepted Answer

When output exceeds the natural rate, prices rise, leading to a higher demand for money and shifting the LM curve left until output returns to the natural rate.

In the Long-Run ISLM Model and with Everything Else Held