Consider the AD/AS Macro Model

question 37

Multiple Choice

Consider the AD/AS macro model.A permanent demand shock that causes equilibrium output to rise above potential output will

• A)allow a stable expansion of real income over time.
• B)always reverse itself.
• C)be negated in the long run,through the economy's adjustment process.
• D)result in a price level lower than that preceding the demand shock.
• E)set off an endless cycle of price rises and increases in unemployment.

---

Definitions:

Free Labor Flows

The unrestricted movement of laborers across regions or countries, allowing workers to seek employment where they choose without barriers.