Figure 7-3 -Employing Figure Above with Equilibrium Initially at E0, Assume the E0

Multiple Choice

Figure 7-3
-Employing Figure above with equilibrium initially at E0, assume the nominal money supply eased. If prices are flexible, in the short run ________ and in the long run ________.

A) prices and output rise as in E2; output remains at 3000
B) prices and output remain at E0; output changes to 2500
C) prices and output rise, E0 to E2; output returns to E3
D) None of the above.