1.

Suppose the economy is initially in long run equilibrium Then suppose there is a drought that destroys much of the wheat crop if policymakers allow the economy to adjust to long-run equilibrium on its own, according to the model to aggregate demand and aggregate supply what happens to prices and output in the long run ?

A. Output rises, prices are unchanged from the initial value
B. Output and the price level are unchanged from their initial values
C. Output falls, prices are unchanged from the initial value
D. Prices fall, output is unchanged from its initial value
Answer» C. Output falls, prices are unchanged from the initial value


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