In the Aggregate Demand/aggregate Supply Model, When the Output of an Economy

Multiple Choice

In the aggregate demand/aggregate supply model, when the output of an economy is less than its long-run potential, the economy will experience

A) declining real wages and interest rates that will stimulate employment and real output.
B) rising interest rates that will stimulate aggregate demand and restore full employment.
C) a budget surplus that will stimulate demand and, thereby, help restore full employment.
D) rising real wages and real interest rates that will restore equilibrium at a higher price level.