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?
ANSWER
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.
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