Suppose That the Current Price Level Is 110, Real GDP

question 103

Multiple Choice

Suppose that the current price level is 110, real GDP is $100 billion, and long-run aggregate supply is $95 billion. We can conclude that

• A) the price level will fall until long-run aggregate supply shifts to $100 billion.
• B) the price level will fall and input prices will rise until real GDP pulls long-run aggregate supply up to $100 billion.
• C) input prices will rise until real GDP is $95 billion.
• D) aggregate demand will increase until both short-run and long-run aggregate supply equal $100 billion.

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