-In the New Classical Model in the Figure Above, the Long-Run

question 17

Multiple Choice

-In the new classical model in the figure above, the long-run effects of an anticipated increase in aggregate demand that is less than expected ________.

• A) increases output from Y_n to Y₂, and the inflation rate from P₁ to P₂
• B) decreases output from Y_n to Y₅, and increases the inflation rate from P₁ to P₅
• C) does not change output and increases the inflation rate from P₁ to P₃
• D) does not affect the levels of real output or inflation

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Definitions:

Market Equilibrium

A state in a market where the quantity supplied equals the quantity demanded, resulting in no incentive for price changes.

Excess Supply

A situation in which the quantity of a good or service supplied is greater than the quantity demanded at the current price.

Rent Control

Government laws or policies that limit the amount landlords can charge for leasing residential property to protect tenants from steep rent increases.

Rental Housing

Properties available for rent, providing accommodation to tenants in exchange for regular payments to the landlord.