If the Economy Is Operating on the Long-Run Aggregate Supply

question 47

Multiple Choice

If the economy is operating on the long-run aggregate supply curve, then expansionary fiscal policy will

• A) generate higher prices in the short run, but will induce aggregate supply to increase in the long run.
• B) generate an increase in real GDP and higher prices in both the short run and the long run.
• C) generate an increase in real GDP without higher prices in the short run, but then real GDP will return to its long-run level, and the price level will increase.
• D) generate an increase in real GDP and higher prices in the short run, but then real GDP will decrease to its long-run level, and the price level will increase some more.

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Definitions:

Life Expectancy

The average number of years that a person or animal can expect to live, based on statistical averages for a population.

Hispanic Females

Women who identify with Hispanic culture, which includes individuals of countries where Spanish is spoken, particularly in Latin America and Spain.

United States

A country located in North America, comprising 50 states, a federal district, five major self-governing territories, and various possessions.

Semantic Memory

A component of long-term memory that processes ideas and concepts not drawn from personal experience, encompassing knowledge of facts, meanings, and language usage.