Everything else held constant,when actual output exceeds the natural rate of output ________ aggregate supply ________.
A)short-run;decreases
B)short-run;increases
C)long-run;increases
D)long-run;decreases

Question

Quizplus · Accepted Answer

When actual output exceeds the natural rate of output in the short-run, firms may face higher input costs due to increased demand for their inputs. This can cause a decrease in aggregate supply, as firms are less willing/able to produce at higher costs. In the long-run, the natural rate of output adjusts to the higher actual output, resulting in an increase in aggregate supply.

Everything Else Held Constant,when Actual Output Exceeds the Natural Rate