6. Assuming the economy is initially in medium run equilibrium, which of the following occurs in response to an expansio

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6 Assuming The Economy Is Initially In Medium Run Equilibrium Which Of The Following Occurs In Response To An Expansio 1 (34.49 KiB) Viewed 90 times

6. Assuming the economy is initially in medium run equilibrium, which of the following occurs in response to an expansion in government spending: a) In the short run, prices and the interest rate rise but output is unchanged due to the increases in prices that leaves the real money supply unchanged. b) In the short run, prices and output rise but the interest rate is unchanged due to the increases in prices that leaves the real money supply unchanged. c) In the short run, prices and output rise and the LM curve shifts leftwards/upward. d) In the medium run, prices and output are unchanged but the interest rate rises. e) In the short run, prices and output rise and the LM curve shifts downward.