AD Increase in Long-Run Equilibrium

Steps:

• Aggregate demand shifts right from AD1 to AD2, intersecting vertical long-run AS.
• New equilibrium raises average price level while real output stays at potential GDP.
• Nominal GDP rises due to higher prices with constant real output.
• Diagram confirms price level effect without real GDP change.

Why A is correct:

• Nominal GDP = price level × real GDP; price level increases while real GDP constant, so nominal GDP rises.

Why the others are wrong:

• B: Nominal GDP changes as prices rise.
• C: Real GDP unchanged at full employment level.
• D: Real GDP stable, does not fall.

Final answer: A