Assume Equilibrium Real GDP Per Year Is Equal to Full-Employment

question 222

Multiple Choice

Assume equilibrium real GDP per year is equal to full-employment real GDP. If aggregate demand falls, then

• A) the price level will increase in the short run and decrease in the long run.
• B) there will be an expansionary gap.
• C) there will be a recessionary gap.
• D) long-run aggregate supply will eventually decrease too.

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