Asked by Brenna McPhee on May 30, 2024
Verified
If policymakers expand aggregate demand, then in the long run
A) prices will be higher and unemployment will be lower.
B) prices will be higher and unemployment will be unchanged.
C) prices and unemployment will be unchanged.
D) prices will be lower and unemployment will be higher.
Aggregate Demand
It refers to the total demand for all goods and services within a particular economy at current price levels.
Long Run
A period in economics where all factors of production and costs are variable, allowing companies to adjust to market demands.
Prices
The amount of money required to purchase a good or service, serving as a signal for scarcity and demand in the market.
- Discern the distinctions between the transient and enduring impacts of economic strategies on both unemployment and inflation.
Verified Answer
AL
Angelica LesterJun 06, 2024
Final Answer :
B
Explanation :
In the long run, an expansion of aggregate demand typically results in higher price levels (inflation) as the economy adjusts, but the natural rate of unemployment remains unchanged due to adjustments in wages and prices. This is consistent with the long-run vertical aggregate supply curve in macroeconomic models.
Learning Objectives
- Discern the distinctions between the transient and enduring impacts of economic strategies on both unemployment and inflation.