Suppose the economy is at an equilibrium on the LRAS curve and the government increases spending.In the short run one would expect

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Quizplus · Accepted Answer

An increase in government spending would shift the AD curve to the right, causing output and prices to increase in the short run. However, in the long run, output would return to its original level and prices would be higher due to increased demand for resources.

Suppose the Economy Is at an Equilibrium on the LRAS