Starting from long-run equilibrium,the long-run impact(s)of an increase in autonomous consumption,compared to the original equilibrium,would be
A) higher inflation.
B) higher output.
C) higher inflation and higher output.
D) lower inflation and lower output.
E) lower inflation and higher output.

Question

Quizplus · Accepted Answer

An increase in autonomous consumption shifts the aggregate demand curve to the right, leading to higher inflation in the long run as the economy adjusts back to full employment output. Output returns to its original level due to the vertical long-run aggregate supply curve.

Starting from Long-Run Equilibrium,the Long-Run Impact(s)of an Increase in Autonomous