Shifts in aggregate demand affect the price level in
A)the short run but not in the long run.
B)the long run but not in the short run.
C)both the short and long run.
D)neither the short nor long run.

Question

Quizplus · Accepted Answer

Shifts in aggregate demand affect the price level in both the short and long run. In the short run, an increase in aggregate demand will lead to an increase in the price level, while a decrease in aggregate demand will lead to a decrease in the price level. In the long run, however, the price level will return to its original level, as the economy adjusts to the new level of aggregate demand.

Shifts in Aggregate Demand Affect the Price Level in