The AD-AS model implies that,in the long run,
A) the economy adjusts very quickly to demand shocks
B) changes in government spending have no effect on GDP
C) the price level never changes
D) a mixture of fiscal and monetary policy is necessary to achieve full employment
E) the Fed controls output

Question

Quizplus · Accepted Answer

In the long run, the AD-AS model suggests that the economy returns to its potential output, meaning changes in government spending do not affect GDP, as the economy self-adjusts to full employment.

The AD-AS Model Implies That,in the Long Run