An economy in long-run equilibrium experiences an increase in ...

[mwit1967]

An economy in long-run equilibrium experiences an increase in aggregate demand. According to the classical model,
 
  A) the price level will increase, but real GDP will not change.
  B) the price level and real GDP will increase at the same time.
  C) the price level will increase, but real GDP will decrease.
  D) the price level will rise first, then real GDP will increase.

Question 2

The consumption function shows how much
 
  A) households plan to consume per year at each possible interest rate.
  B) real disposable income people will earn at each income tax bracket.
  C) households plan to consume per year at each level of real disposable income.
  D) households plan to consume per year at each level of savings.

[cswans24]

Answer to Question 1

A

Answer to Question 2

C