Suppose the Government Increases Aggregate Demand to a Level That

question 49

Multiple Choice

Suppose the government increases aggregate demand to a level that increases GDP above its long-run equilibrium level.What sequence of events would follow?

• A) Prices rise;GDP increases;workers demand higher wages;short-run aggregate supply shifts to the left;GDP drops
• B) Prices fall;workers receive lower wages;short-run aggregate supply shifts to the right;GDP rises
• C) Prices rise;GDP increases;workers demand higher wages;long-run aggregate supply shifts to the left;GDP falls
• D) Prices fall;workers receive lower wages;aggregate supply shifts to the right;GDP rises

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