Beginning at a Long-Run Equilibrium, an Increase in Aggregate Demand

question 10

Multiple Choice

Beginning at a long-run equilibrium, an increase in aggregate demand

• A)increases the price level and in the long run increases real GDP.
• B)increases the price level and in the long run decreases real GDP.
• C)decreases the price level and in the long run increases real GDP.
• D)decreases the price level and in the long run decreases real GDP.
• E)increases the price level, but in the long run there is no change in real GDP.

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Definitions:

Deadweight Loss

The loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved or is not achievable.

Tax Revenues

The income that is gained by governments through taxation, which is then used to fund public services and infrastructure.

Deadweight Loss

The loss of economic efficiency that occurs when the equilibrium outcome is not achievable or not achieved in a market.

Tax Revenue

The financial earnings acquired by governments via taxation.