A positive shock to spending will shift the aggregate demand curve to the right and increase output in the short run,but not in the long run.

Question

Quizplus · Accepted Answer

A positive shock to spending will increase aggregate demand, causing firms to increase production and hire more workers in the short run. However, in the long run, the economy will adjust to the new equilibrium and output will return to its potential level, so the increase in output is only temporary.

A Positive Shock to Spending Will Shift the Aggregate Demand