Suppose You Were to Observe an Increase in Real GDP

question 38

Multiple Choice

Suppose you were to observe an increase in real GDP with no change in the price level. If you held the long-run perspective of no trade-offs between inflation and unemployment, you could explain your observation only in terms of

• A) a simultaneous reduction in aggregate demand and potential GDP.
• B) an increase in aggregate demand alone.
• C) an increase in potential GDP with no change in aggregate demand.
• D) a simultaneous increase in aggregate demand and potential GDP.
• E) an increase in aggregate demand accompanied by a reduction in potential GDP.

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