Consider an economy initially at long-run equilibrium with output (Y)equal to potential output (Y*).If the SRAS curve is positively sloped,then an increase in the demand for Canadian-made goods in Europe will lead to ___________ in the price level,in the short run.In the long run,the SRAS curve will shift to the left and the equilibrium will be at _________.

Question

Quizplus · Accepted Answer

In the short run, an increase in demand will lead to an increase in the price level as firms are able to charge more for their goods. In the long run, the SRAS curve will shift to the left as firms increase their capacity to meet the higher demand, leading to a decrease in the price level and a return to potential output.

Consider an Economy Initially at Long-Run Equilibrium with Output (Y)equal