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Figure: AD-AS Model
-(Figure: AD-AS Model) Look at the figure AD-AS Model. Suppose the economy is at Y_E with a price level of P_1. Which of the following would represent the new long-run equilibrium position if the aggregate demand curve shifted to the right from AD₁ to AD₂ as a result of an increase in the money supply?

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Use the following to answer question :
Figure: AD-AS Model

-(Figure: AD-AS Model) Look at the figure AD-AS Model. Suppose the economy is at Y_E with a price level of P_1. Which of the following would represent the new long-run equilibrium position if the aggregate demand curve shifted to the right from AD₁ to AD₂ as a result of an increase in the money supply?

Quizplus · Accepted Answer

In the long run, the economy returns to full employment output (Y_E), but with a higher price level (P₃) due to the rightward shift in aggregate demand.

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