From a neoclassical view, which of the following is a true statement?

A.Lower wages will cause an economy-wide increase in the price of a key input.
B.Because wages are flexible, they are unaffected by high rates of unemployment.
C.A surge in aggregate demand ends up as a rise in output, but does not increase price levels.
D.The economy cannot sustain production above its potential GDP in the long run.

ANSWER:

D.The economy cannot sustain production above its potential GDP in the long run.