When the price level rises,what happens to real output in the short run and long run as a result?
A)Real output tends to increase in the short run but not in the long run.
B)Real output tends to increase in the long run but not in the short run.
C)Real output tends to decrease in the short run but not in the long run.
D)Real output tends to increase in both the short run and the long run.

Question

Quizplus · Accepted Answer

In the short run, an increase in the price level can lead to an increase in real output due to the temporary boost in demand for goods and services. However, in the long run, prices adjust fully to the increase in the price level and real output returns to its natural level, which is determined by factors such as technology, labor, and capital. Therefore, in the long run, real output tends to stay the same regardless of changes in the price level.

When the Price Level Rises,what Happens to Real Output in the Short