Consider the basic AD/AS macro model in long- run equilibrium. An expansionary AD shock would have _ output effect in the short run and _ output effect in the long run.
A)a positive; a positive
B)a positive; no
C)no; a positive
D)no; no
E)not enough information to know

Question

Quizplus · Accepted Answer

In the short run, an expansionary AD shock would increase output due to a shift in the AD curve. However, in the long run, prices and wages adjust to the new equilibrium, shifting the SAS curve leftward until output returns to its original level. Therefore, in the long run, there would be no effect on output.

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