When the Economy Is Operating on Its Long-Run Aggregate Supply

question 26

Multiple Choice

When the economy is operating on its long-run aggregate supply curve and the government initiates an expansionary fiscal policy,the result is

• A)a permanent increase in real national income and a permanent increase in the price level.
• B)a temporary increase in real national income and a temporary increase in the price level.
• C)a temporary increase in real national income and an increase in the price level,followed by a reduction of real national income to its original level and a further increase in the price level.
• D)a temporary increase in real national income and an increase in the price level,followed by a further increase in the price level.