Suppose the Current Situation Is Such That the Price Level

question 316

Multiple Choice

Suppose the current situation is such that the price level is 120, real GDP is $13 trillion, and GDP along the long-run aggregate supply curve is $12.6 trillion. What will take place to restore the long-run equilibrium?

• A) The price level will fall and money wage rates will rise until real GDP along the long-run aggregate supply curve is $13 trillion.
• B) The price level will fall until long-run aggregate supply increases to $13 trillion.
• C) Aggregate demand will increase until both short-run and long-run aggregate supply equal $13 trillion.
• D) Money wage rates will rise until real GDP is $12.6 trillion.