If the economy is in long run equilibrium and aggregate demand increases, then in the short run
A) nothing happens because the economy is in long run equilibrium.
B) the price level rises and real GDP does not change.
C) real GDP increases and the price level does not change.
D) the price level rises and real GDP increases.

Question

Quizplus · Accepted Answer

In the short run, an increase in aggregate demand leads to both a rise in the price level and an increase in real GDP. This is because prices and wages do not adjust immediately, allowing for real effects on output.

If the Economy Is in Long Run Equilibrium and Aggregate