Which of the following would cause an increase in the price level in the long run?
A) The number of workers in the labor force increases.
B) Net exports decrease.
C) Investment increases.
D) Natural resources increase.
E) There is a temporary increase in the price of oil.

Question

Quizplus · Accepted Answer

An increase in investment can lead to an increase in output and a decrease in unemployment in the short run. However, in the long run, an increase in investment can lead to an increase in the production capacity of the economy, which can cause an increase in the price level due to a shift in the aggregate supply curve to the left. The other options are not likely to cause a long-run increase in the price level. A) an increase in the labor force may lead to an increase in output and a decrease in the price level. B) a decrease in net exports may decrease aggregate demand and cause a decrease in the price level. D) an increase in natural resources may lead to an increase in output and a decrease in the price level in the short run. E) a temporary increase in the price of oil may cause a temporary increase in the price level, but it is unlikely to have a long-run impact.

Which of the Following Would Cause an Increase in the Price