Consider an Economy Starting from a Position of Full Employment

Multiple Choice

Consider an economy starting from a position of full employment. Which one of the following changes does not occur as a result of an increase in aggregate demand?

A) The price level rises.
B) Real GDP increases in the short run.
C) An inflationary gap arises.
D) Factor prices rise in the long run, shifting the short-run aggregate supply curve to the left.
E) The long-run aggregate supply curve shifts rightward to create the new long-run equilibrium.