Suppose the Economy Is Initially in Long-Run Equilibrium

question 19

Multiple Choice

Suppose the economy is initially in long-run equilibrium. Then suppose there is an increase in military spending due to rising international tensions. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the long run?

• A) Output falls; prices are unchanged from the initial value.
• B) Prices fall; output is unchanged from its initial value.
• C) Output and the price level are unchanged from their initial values.
• D) Prices rise; output is unchanged from its initial value.
• E) Output rises; prices are unchanged from the initial value.

---

Definitions:

CAM

Complementary and Alternative Medicine, which refers to a broad range of healthcare practices that are not part of a country's own tradition or conventional medicine.

Aromatherapy

A holistic healing treatment that uses natural plant extracts to promote health and well-being, often through inhalation or application of essential oils.

Health Maintenance

Activities and behaviors aimed at preserving health and preventing disease, including regular exercise, balanced diet, and preventive healthcare.

Avoidance

A psychological coping mechanism that entails keeping away from certain thoughts, feelings, or situations that may cause distress.