Question

Suppose the economy starts off producing natural real gdp. next, aggregate demand rises, ceteris paribus. as a result, the price level rises in the short run. in the long run, when the economy has moved back to producing natural real gdp, the price level will be

Answer 1

The choices on that question are: a. higher than it was in short-run equilibrium.  b.lower than it was in short-run equilibrium but higher than it was originally (before aggregate supply rose).c.lower than it was originally (before aggregate supply rose).d. equal to what it was originally (before aggregate supply rose).The answer is D  equal to what it was originally (before aggregate supply rose) . It would gain back its balance after all the adjustments of maintaining equilibrium through government policies.However, this state does not guarantee full employment.