-An Economy Is in Long-Run Equilibrium and the Price Level

Multiple Choice

-An economy is in long-run equilibrium and the price level is 100 in the figure above. Aggregate demand increases and the aggregate demand curve shifts to AD₁. If the increase in aggregate demand is expected, then the inflation rate is___________ .

A) 20 percent a year
B) 0 percent a year
C) 10 percent a year
D) More than 20 percent a year