What happens to prices and output when the long-run aggregate-supply curve shifts right?
A) Prices and output both increase.
B) Prices and output both decrease.
C) Prices increase and output decreases.
D) Prices decrease and output increases.

Question

Quizplus · Accepted Answer

When the long-run aggregate-supply curve shifts right, it means that the economy's potential output has increased. This allows firms to produce more goods and services at lower costs, which leads to a decrease in prices and an increase in output. Therefore, the best choice is D - prices decrease and output increases.

What Happens to Prices and Output When the Long-Run Aggregate-Supply