CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

If an economy is in long-run equilibrium and an unexpected increase in aggregate demand occurs, the temporary output will ______ and the permanent prices will ______.
A. decrease; increase
B. increase; decrease
C. increase; increase
Explanation: Aggregate demand changes alone cannot permanently change real output. An unexpected increase will, however, cause a temporary economic boom with a temporary increase in output. Aggregate demand changes can cause permanent changes in the price level. Thus, if aggregate demand increases and remains at the higher level, the price level will increase and will remain at the higher level.

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