What Will Happen in the Long Run If There Is

question 36

Multiple Choice

What will happen in the long run if there is an unexpected increase in aggregate demand and the Fed does nothing?

• A)Both output and prices will be higher.
• B)Only the price level will increase; real output will return to its natural level.
• C)A recession will occur and the aggregate demand curve will shift back to its starting position.
• D)The aggregate supply curve will shift rightward; this will return price to its initial level and further increase real output.

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