In the Long Run, How Will an Increase in Aggregate

question 66

Multiple Choice

In the long run, how will an increase in aggregate demand affect price and output?  

• A) The price level will decrease, and the output level will decrease. 
• B) The price level will increase, and the output level will increase. 
• C) The price level will increase, and the output level will decrease. 
• D) The price level will increase, and the output level will remain the same.

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Definitions:

Economic Growth

An increase in the production of goods and services in an economy over a period of time, indicating improvement in living standards.

Technological Innovations

The implementation of new technologies or the novel application of existing technologies to create new products, processes, or services.

Smoot-Hawley

Refers to the Smoot-Hawley Tariff Act of 1930, a legislation passed in the United States that imposed high tariffs on imported goods to protect American businesses and farmers, which is widely considered to have exacerbated the Great Depression.

Federal Tax Revenue

The income collected by the federal government through various types of taxes to fund national programs and services.