Consider the basic AD/AS macro model,initially in a long-run equilibrium.A positive AS shock will ________ the price level and ________ output in the short run.In the long run,the price level will ________ and output ________.
A)decrease; decrease; decrease further; will decrease further
B)decrease; increase; decrease further; will be restored to potential output
C)decrease; increase; return to its initial level; will be restored to potential output
D)increase; increase; decrease; will be restored to potential output
E)increase; increase; return to its initial level; will be restored to potential output

Question

Quizplus · Accepted Answer

A positive AS (Aggregate Supply) shock means that the supply of goods and services has increased, which typically leads to a decrease in the price level and an increase in output in the short run. In the long run, prices and output tend to return to their initial levels or potential output, as the economy adjusts.

Consider the Basic AD/AS Macro Model,initially in a Long-Run Equilibrium