Scenario 14-1

Multiple Choice

Scenario 14-1. The economy is in long-run equilibrium. Suddenly, due to improved international relations and the increased confidence of policymakers, citizens become more optimistic about the future and stay this way for a long time.
-Refer to Scenario 14-1. How does the new long-run equilibrium differ from the original one?

A) Both the price level and real GDP are higher.
B) Both the price level and real GDP are lower.
C) The price level is the same and real GDP is higher.
D) The price level is higher and real GDP is the same.