The Initial Aggregate Demand Curve Is AD₁ and the Initial

question 99

Multiple Choice

The initial aggregate demand curve is AD₁ and the initial aggregate supply curve is AS₁.In the long run, the aggregate supply curve is vertical in the diagram because:

• A)nominal wages and other input prices are assumed to be fixed.
• B)real output level Q_f is the potential level of output.
• C)price level increases produce perfectly offsetting changes in nominal wages and other input prices.
• D)higher than expected rates of actual inflation reduce real output only temporarily.

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