Along the long-run aggregate supply curve, the price level ____ with increases in aggregate demand.
A)does not change
B)increases
C)decreases slightly
D)decreases dramatically

Question

Along the long-run aggregate supply curve, the price level ____ with increases in aggregate demand.
A)​does not change
B)​increases
C)​decreases slightly
D)​decreases dramatically

Quizplus · Accepted Answer

Along the long-run aggregate supply curve, the price level increases with increases in aggregate demand. This is because in the long run, all inputs are flexible and adjust to changes in demand, allowing firms to increase output. However, increasing output eventually leads to higher costs, which are passed on to consumers in the form of a higher price level.

Along the Long-Run Aggregate Supply Curve, the Price Level ____