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If the Economy Is Initially at Potential GDP and People

Question 169

Multiple Choice

If the economy is initially at potential GDP and people correctly anticipate an increase in inflation so that their money wage rate adjusts immediately, then


A) only real GDP increases with no change in the price level.
B) only the price level rises with no change in real GDP.
C) both the price level and real GDP increase.
D) neither the price level nor real GDP increase.

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