In the short run, output increases in response to a rising price level, but not in the long run.

Question

Quizplus · Accepted Answer

In the short run, producers may increase production in response to a rising price level due to the price effect and profit effect. However, in the long run, factors of production, such as labor and capital, are more flexible and can be adjusted, leading to a shift in the aggregate supply curve. In the long run, the price level has no effect on the level of output.

In the Short Run, Output Increases in Response to a Rising