In the very long-run AD-AS model, if the AD-curve shifts to the left, then
A)prices and output will both decrease
B)prices and output will both increase
C)prices will decrease but output will remain the same
D)output will decrease but prices will remain the same
E)output will increase but prices will decrease

Question

Quizplus · Accepted Answer

In the very long-run AD-AS model, a leftward shift in the AD curve indicates a decrease in aggregate demand. This typically leads to a decrease in the price level as the economy adjusts. However, in the very long run, output is determined by factors such as technology, resources, and labor, which are not affected by changes in the AD curve. Therefore, while prices decrease, output remains at its natural level, unaffected by the shift in AD.

In the Very Long-Run AD-AS Model, If the AD-Curve Shifts