Compared to the initial equilibrium,an initial increase in aggregate demand that is NOT followed by an increase in the quantity of money results in new long-run equilibrium with
A)the same price level and the same real GDP.
B)a higher price level but the same real GDP.
C)the same price level and a lower level of real GDP.
D)a higher price level and an increased level of real GDP.
E)None of the above answers is correct.

Question

Quizplus · Accepted Answer

In the long run, the economy returns to full employment output (same real GDP) but at a higher price level due to the initial increase in aggregate demand without a corresponding increase in the money supply.

Compared to the Initial Equilibrium,an Initial Increase in Aggregate Demand