In the long run, changes in the prices of goods and services have no effect on:
A) the macroeconomy.
B) aggregate supply.
C) aggregate demand.
D) All of these are true.

Question

Quizplus · Accepted Answer

In the long run, changes in the prices of goods and services are neutral with respect to the real economy, meaning they do not affect the overall capacity of the economy to produce goods and services (aggregate supply) or the total demand for goods and services (aggregate demand). This concept is rooted in classical economics, which posits that the economy is self-correcting and that prices and wages are flexible, adjusting to ensure that all resources are fully employed.

In the Long Run, Changes in the Prices of Goods