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

Question

Quizplus · Accepted Answer

A negative AS shock increases the price level and decreases output in the short run. In the long run, the price level decreases as the economy adjusts, and output is restored to potential output.

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