Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, in the period in which a positive supply shock occurs, the DAS curve _____ and the DAD curve _____.
A) shifts upward; shifts rightward
B) shifts upward; does not shift
C) does not shift; does not shift
D) shifts downward; shifts leftward

Question

Quizplus · Accepted Answer

A positive supply shock will shift the SAS curve to the right, causing output to increase and prices to decrease. This shift in the SAS curve will not affect the position of the DAD curve, as it represents the long-run trend in aggregate demand. Therefore, the correct answer is B: the DAS curve shifts upward, but the DAD curve does not shift.

Beginning at Long-Run Equilibrium in the Dynamic Model of Aggregate