An Economy Is in Long-Run Equilibrium and the Price Level

question 4

Multiple Choice

An economy is in long-run equilibrium and the price level is 100 in the figure above. Aggregate demand increases and the aggregate demand curve shifts to AD₁. If the increase in aggregate demand is expected, then the inflation rate is

• A) 0 percent a year.
• B) 10 percent a year.
• C) 20 percent a year.
• D) More than 20 percent a year.

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Definitions:

Metaphysical Environment

An abstract concept referring to environments or conditions that go beyond the physical realm, often relating to philosophical or spiritual aspects.

Anthropologist

A scientist who studies human societies, cultures, and their development.

Physical Environment

The surrounding conditions, including natural and artificial, in which an organism lives and operates.

Physical Environment

The surrounding physical space including natural and man-made elements, which significantly influences individuals’ well-being and behavior.