MCQOPTIONS
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| 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 | |