The Stock Market Boom of 2010
Imagine that in 2010 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time.
-Refer to Stock Market Boom 2010.In the long run,the change in price expectations created by the stock market boom 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

Quizplus · Accepted Answer

In the long run, higher stock prices can lead to increased wealth and spending, raising price expectations. This shifts the short-run aggregate supply left as firms anticipate higher costs and wages.