If There Is an Unanticipated Increase in Aggregate Demand, Then

Multiple Choice

If there is an unanticipated increase in aggregate demand, then according to new classical economics, the economy will self-correct with a(n)

A) decrease in short-run aggregate supply, so output returns to its initial level but the price level rises.
B) decrease in short-run aggregate supply, so output increases and the price level rises.
C) decrease in short-run aggregate supply, so output returns to its initial level and the price level falls.
D) increase in short-run aggregate supply, so output increases and the price level rises.