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)rightward; AD
C)leftward; AS
D)leftward; AD
E)leftward; Y*

Question

Quizplus · Accepted Answer

In the long run, the economy tends to return to its potential output level after a negative aggregate supply (AS) shock. This adjustment occurs through a rightward shift in the AS curve, as prices and wages adjust over time, allowing the economy to return to its natural level of output.

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