Consider an Economy Starting from a Position of Full Employment

Multiple Choice

Consider an economy starting from a position of full employment.Which one of the following changes does not occur as a result of an increase in aggregate demand?

A) An inflationary gap arises.
B) The long- run aggregate supply curve shifts rightward to create the new long- run equilibrium.
C) The price level rises.
D) Real GDP increases in the short run.
E) Factor prices rise in the long run, shifting the short- run aggregate supply curve to the left.