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

Question

Quizplus · Accepted Answer

A positive AS shock will increase the output level above potential output in the short run, but the economy will adjust to the new long-run equilibrium level of output at potential output. This implies a leftward shift in the AS curve, as the higher price level stimulated by the shock will not be sustainable in the long run.

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