If the Economy Is Initially in Long-Run Equilibrium, Which of the Following

question 95

Multiple Choice

If the economy is initially in long-run equilibrium, which of the following best describes the effects of a shift in aggregate demand?

• A)Prices and output are affected in both the short and long run.
• B)Prices and output are affected only in the short run.
• C)Prices are affected in the long and short run, but output only in the short run.
• D)Prices are affected in the long and short run, but output only in the long run.

---

Definitions:

Liberalize International Trade

The process of reducing tariffs, quotas, and other barriers to allow for the free flow of goods and services across national borders.

Foreign Trade Competition

The competition that domestic companies face from abroad, influencing local markets, pricing, and product offerings.

European Union

A political and economic union of 27 European countries that are tied by common policies covering a wide range of areas, including trade, security, and law.

Common Fiscal Policy

A coordinated approach by multiple governments or entities to manage tax policies, government spending, and public debt to influence economic conditions.