The Economy Is at Potential GDP When People Correctly Anticipate

Multiple Choice

The economy is at potential GDP when people correctly anticipate an increase in government expenditure on goods and services. If the money wage rate adjusts immediately, then

A) real GDP and the price level will increase in the short run, but the real wage rate will fall.
B) real GDP remains at potential GDP.
C) real GDP, the price level, and the real wage rate all increase in the short run.
D) real GDP remains at potential GDP, there is no change in the price level, and the real wage rate rises in the short run.