Changes in the price level
A)increase the level of aggregate supply in the long run.
B)decrease the level of aggregate supply in the long run.
C)do not affect the level of aggregate supply in the long run.
D)increase the level of aggregate supply in the long run only at very high levels of output.
E)increase the level of aggregate supply in the long run only at very low levels of output.

Question

Quizplus · Accepted Answer

Changes in the price level only affect the short-run aggregate supply curve in the economy, but have no impact on the long-run aggregate supply curve. In the long run, the level of aggregate supply is determined by factors such as technological advancements, capital formation, and labor force growth, which are not affected by changes in the price level. Therefore, the level of aggregate supply remains constant in the long run.

Changes in the Price Level