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. In Exhibit 10-8, if aggregate demand shifts from AD1 to AD3,

a. real GDP will increase from $3.0 to $4.0, and the price level will increase from 100 to 140. b. real GDP will increase from $3.0 to $7.0, and the price level will increase from 100 to 140. c. real GDP will increase from $3.0 to $4.0, and the price level does not change.
d. real GDP will increase from $3.0 to $7.0, and the price level will increase from 100 to 120. e. real GDP will not change and the price level will increase from 100 to 140.

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Final answer:

In the long run, a shift in aggregate demand from AD1 to AD3 would typically result in an increase in the price level without a change in real GDP, as the long-run aggregate supply curve is vertical at the level of potential GDP.

Step-by-step explanation:

When considering how aggregate demand determines the price level in the long run, it is important to recognize that shifts in aggregate demand can lead to different economic outcomes. Based on the provided information, when aggregate demand shifts right from AD to AD1, and then to AD2, there is no change in the real GDP or the level of unemployment. Instead, there is an inflationary pressure, causing an increase in the price level.

The scenarios described in Exhibit 10-8 are not provided; however, drawing insights from similar scenarios presented in the figures, here is a general explanation. An initial equilibrium (E0) is established at a certain output level, which is equal to the potential GDP, and with a specific price level. When the aggregate demand shifts right from AD to AD1 to AD2, the long-run outcome detailed in Figure 12.4 and similar figures indicates that the price level increases, but the real GDP remains at the potential GDP level. Therefore, the question related to a shift from AD1 to AD3 suggests that the most likely outcome in the long run would be the one where real GDP does not change and the price level increases. This is because, in the long run, the long-run aggregate supply curve is vertical at the level of potential GDP, which dictates the real GDP in the economy.

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