Consider the basic AD/AS macro model in long-run equilibrium.A negative AS shock will ________ the price level and ________ output in the short run.In the long run,the price level will ________ and output ________.
A)decrease; decrease; decrease further; will decrease further
B)decrease; decrease; decrease further; will be restored to potential output
C)increase; decrease; decrease; will be restored to potential output
D)increase; decrease; increase further; will be restored to potential output
E)increase; increase; increase further; will be restored to potential output

Question

Quizplus · Accepted Answer

A negative AS shock increases the price level and decreases output in the short run. In the long run, the price level decreases as the economy adjusts, and output returns to potential output.

Consider the Basic AD/AS Macro Model in Long-Run Equilibrium