A temporary positive shock to spending growth will lead to an increase in:
A) output in both the short run and the long run.
B) both output and prices in the short run,but only prices in the long run.
C) both prices and output in the short run,but only output in the long run.
D) output and prices in the short run,but no change in either in the long run.

Question

Quizplus · Accepted Answer

A temporary positive shock to spending growth typically increases both output and prices in the short run due to higher demand. However, in the long run, the economy returns to its potential output level, and prices stabilize, leading to no permanent change in either output or prices.

A Temporary Positive Shock to Spending Growth Will Lead to an Increase