Consider the AD/AS Macro Model

Multiple Choice

Consider the AD/AS macro model. A permanent demand shock that causes equilibrium output to rise above potential output will

A) allow a stable expansion of real income over time.
B) be negated in the long run, through the economy's adjustment process.
C) result in a price level lower than that preceding the demand shock.
D) always reverse itself.
E) set off an endless cycle of price rises and increases in unemployment.