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

Question

Quizplus · Accepted Answer

In response to a positive demand shock, the Dynamic Aggregate Demand (DAD) curve shifts rightward as demand increases. The Dynamic Aggregate Supply (DAS) curve does not shift immediately because it represents the long-term supply, which is not affected by short-term demand changes.

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