How can the long-run equilibrium level of real Gross Domestic ...

[futuristic]

How can the long-run equilibrium level of real Gross Domestic Product (GDP) increase without the price level changing?
 
  What will be an ideal response?

Question 2

In order to ________ the long-run real interest rate, the Fed needs to ________.
 
  A) raise; raise the long-run inflation expectations B) raise; lower the long-run nominal interest rate
  C) lower; raise the long-run nominal interest rate D) lower; raise the long-run inflation expectations

[jharrington11]

Answer to Question 1

Since the long-run aggregate supply curve is vertical, the only way real Gross Domestic Product (GDP) can increase without the price level changing is if aggregate demand increases and long-run aggregate supply increases. For the latter to happen, either the endowment of inputs must increase or technology must change.

Answer to Question 2

D

[futuristic]

Excellent

[lcapri7]

Gracias!