What happens to prices and output when the long-run aggregate-supply curve shifts left?
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 left, it means that the economy's potential output has decreased due to factors such as a decrease in resources or technological progress. As a result, the equilibrium output will decrease while the price level will increase. Therefore, prices increase and output decreases.

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