Suppose the Economy Is Initially in Long-Run Equilibrium

question 129

Multiple Choice

Suppose the economy is initially in long-run equilibrium. Which statement best describes the state of the economy after an increase in aggregate demand?

• A) Prices and output are higher.
• B) Prices and output are lower.
• C) Prices are higher and output is the same.
• D) Prices are the same and output is lower.

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Definitions:

Willing To Pay

The maximum amount a consumer is prepared to spend on a good or service, reflecting the perceived value or utility gained from the purchase.

Ticket

A token or voucher that entitles the holder to admission to an event, activity, or service.

Consumer Surplus

the difference between what consumers are willing to pay for a good or service and what they actually pay.

Market Price

The price at which a product or service is sold in the open market, determined by supply and demand.