Multiple Choice
Suppose the economy is initially in long-run equilibrium. Then suppose there is an increase in military spending due to rising international tensions. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the short run?
A) Prices fall; output rises.
B) Prices fall; output falls.
C) Prices rise; output falls.
D) Prices rise; output rises.
Correct Answer:
Verified
Correct Answer:
Verified
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