1947EconomicsMedium
Suppose the economy is initially in long-run equilibrium Then suppose there is an increase in military spending due to rising international tensions According to the model of aggregate demand and aggregate supply what happens to prices and output in the short run?
APrice fall; output rises
BPrice rise; output fall
CPrice fall; output falls
DPrice rise; output rise
Correct answer
D. Price rise; output rise
Explanation
The correct answer is Price rise; output rise.