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Question
Suppose the current situation is such that the price level is 120, real GDP is $14 trillion, and long-run aggregate supply is $13.6 trillion. We can conclude that
A) the price level will fall until long-run aggregate supply shifts to $14 trillion.
B) the price level will fall and input prices will rise until real GDP pulls long-run aggregate supply up to $14 trillion.
C) input prices will rise until real GDP is $13.6 trillion.
D) aggregate demand will increase until both short-run and long-run aggregate supply equal $14 trillion.
Answer
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