In the long run, an increase in the price level:
A)increases output prices relative to input prices.
B)increases the profit margins of many producers.
C)increases RGDP supplied.
D)does none of the above.
E)does all of the above.

Question

Quizplus · Accepted Answer

An increase in the price level does not necessarily lead to any of the outcomes listed. It may lead to a decrease in purchasing power for consumers, leading to a decrease in demand and RGDP supplied. It may also increase input prices for producers, leading to narrower profit margins or even losses. Therefore, choice D is the best answer.

In the Long Run, an Increase in the Price Level