Refer to the information provided in Figure 12.7 below to answer the questions that follow.
Figure 12.7
-Refer to Figure 12.7.Which of the following statements characterizes an output level of $800 billion?
A)It is sustainable over the long run without inflation.
B)It is achievable only in the long run.
C)It is attainable in the short run but it is associated with increases in the price level.
D)It can be achieved only if investment is independent of the interest rate.

Question

Refer to the information provided in Figure 12.7 below to answer the questions that follow.
  Figure 12.7
-Refer to Figure 12.7.Which of the following statements characterizes an output level of $800 billion?
A)It is sustainable over the long run without inflation. 
B)It is achievable only in the long run. 
C)It is attainable in the short run but it is associated with increases in the price level. 
D)It can be achieved only if investment is independent of the interest rate.

Quizplus · Accepted Answer

From the graph, an output level of $800 billion intersects with the aggregate demand curve at a point where the price level is relatively high. This suggests that achieving an output level of $800 billion in the short run is possible, but it would be associated with increases in the price level (i.e. inflation).

Refer to the Information Provided in Figure 12