As an expansionary gap is closed in the long run,
A)nominal and real GDP decline
B)nominal and real GDP increase
C)nominal GDP increases but real GDP declines
D)nominal GDP declines but real GDP increases
E)real GDP declines,but nominal GDP can increase,decrease,or remain the same

Question

Quizplus · Accepted Answer

In the long run, as an expansionary gap is closed, real GDP declines to its potential level, while nominal GDP can vary depending on changes in the price level.

As an Expansionary Gap Is Closed in the Long Run