Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.

-Refer to Optimism.In the long run,the change in price expectations created by optimism shifts
A)long-run aggregate supply right.
B)long-run aggregate supply left.
C)short-run aggregate supply right.
D)short-run aggregate supply left.

Question

Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.

-Refer to Optimism.In the long run,the change in price expectations created by optimism shifts
A)long-run aggregate supply right.
B)long-run aggregate supply left.
C)short-run aggregate supply right.
D)short-run aggregate supply left.

Quizplus · Accepted Answer

In the long run, pessimism leads to lower price expectations, which shifts the short-run aggregate supply curve to the left as firms reduce output due to lower expected prices.

Pessimism Suppose the Economy Is in Long-Run Equilibrium. Then Because of of Corporate