-Refer to Figure 5.7. If the aggregate demand is AD₀: A) the short-run aggregate supply curve will shift up in the long run to restore equilibrium. B) the short-run aggregate supply curve will shift down in the long run to restore equilibrium. C) the aggregate demand curve will shift up in the long run to restore equilibrium. D) the aggregate demand curve will shift down in the long run to restore equilibrium.

Question

Quizplus · Accepted Answer

In the long run, the aggregate supply curve will shift up to restore equilibrium. This is because in the long run, all factors of production are fully employed and the economy is operating at its potential output.