Consider the AD/AS model and suppose the economy begins at potential output. The effect of a negative AS shock on real GDP will be reversed in the long run with a shift in .
A)rightward; AS
B)leftward; Y*
C)leftward; AD
D)rightward; AD
E)leftward; AS

Question

Quizplus · Accepted Answer

In the long run, the economy self-corrects as wages and prices adjust, leading to a rightward shift in the AS curve, restoring real GDP to potential output.

Consider the AD/AS Model and Suppose the Economy Begins at Potential