11.5 The Long-Run AS Curve
Refer to the information provided in Figure 11.7 below to answer the questions that follow. Figure 11.7
-Refer to Figure 11.7. 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

11.5 The Long-Run AS Curve
Refer to the information provided in Figure 11.7 below to answer the questions that follow.  Figure 11.7
-Refer to Figure 11.7. 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

An output level of $800 billion, if beyond the economy's long-run sustainable output, can be achieved in the short run but is likely to lead to inflation as demand outstrips supply, causing prices to rise. This is consistent with economic theories that suggest short-term increases in output can lead to inflationary pressures.

11.5 the Long-Run AS Curve