In the long run, if the price level decreases, then the economy's output level will:
A) Increase initially, but then fall back again
B) Increase
C) Decrease
D) Stay the same

Question

Quizplus · Accepted Answer

In the long run, the economy's output level is determined by factors such as technology, resources, and institutions, not by the price level. Thus, a decrease in the price level does not affect the long-run output, which remains at its natural level.

In the Long Run, If the Price Level Decreases, Then