Question

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run...

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

a.

in the price level and output.

b.

in the price level, but not output.

c.

in output, but not the price level.

d.

in neither the price level nor output

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Answer #1

Answer

Option b

in the price level, but not output

the long-run aggregate supply curve shows the potential output which is produced using all the available resources at optimum level and it changes if there is a change in the available resources or technology or both but it does not change because of change in aggregate demand as the curve is vertical so if AD shifts right which only increases price and potential output will be same.

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