In the long run, if the price level decreases, then the economy's output level will
A) increase initially, but then fall back again.
B) increase.
C) decrease.
D) stay the same.

Question

Quizplus · Accepted Answer

In the long run, the economy's output level is determined by factors such as technology, resources, and institutions, not by the price level. Therefore, a decrease in the price level does not affect the long-run output, which remains at its natural level.

In the Long Run, If the Price Level Decreases, Then