An increase in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?
A)The price level will fall and the level of GDP will rise.
B)The price level will fall and the level of GDP will fall.
C)The price level will rise and the level of GDP will fall.
D)The price level will rise and the level of GDP will be unaffected.
E)The price level will be unaffected and the level of GDP will rise.

Question

Quizplus · Accepted Answer

In the long run, an increase in aggregate demand typically results in a higher price level as the economy adjusts, but the level of real GDP remains unchanged due to the economy's return to its potential output or full employment level.

An Increase in Aggregate Demand in the Economy Will Have