Within the AD/AS model, how does an economy adjust to an output beyond its long-run capacity as a result of an unanticipated increase in aggregate demand?

a. Wage rates and resource prices will fall, causing a decrease in aggregate demand and the restoration of equilibrium at a higher price level.
b. Long-run aggregate supply will increase, leading to a new equilibrium at a lower price level.
c. Resource prices and real interest rates will rise causing output to fall back to its long-run sustainable rate.
d. Lower real interest rates will stimulate demand and restore equilibrium at the initial price level.


C

Economics

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Indicate whether the statement is true or false

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Which countries undertook economic reforms in the 1960's that resulted in more economic freedom and stronger economic growth?

a. Venezuela and Zimbabwe b. Malawi and Niger c. Hong Kong and Singapore d. United States and Switzerland

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The Federal Insurance Contribution Act (FICA) tax is an example of a(n)

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Existing employees prefer:

A. negative elastic supplies of labor. B. elastic supplies of labor. C. unit-elastic supplies of labor. D. inelastic supplies of labor.

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