Suppose the Economy Was in Long-Run Equilibrium When There Is

Multiple Choice

Suppose the economy was in long-run equilibrium when there is a sudden increase in interest rates. What happens in the short run after the increase in the interest rates?

A) Both the price level and real GDP rise.
B) The price level falls and real GDP does not change.
C) The price level does not change and real GDP falls.
D) Both the price level and real GDP fall.