Use the following to answer questions : Exhibit: AD-AS Shifts -(Exhibit: AD-AS Shifts) Starting from long-run equilibrium at A with output equal to $\bar { Y }$ and the price level equal to P₁, if there is an unexpected monetary contraction that shifts aggregate demand from AD₁ to AD₃, then the long-run neutrality of money is represented by the movement from: A) A to B B) A to G C) A to C D) A to D

Question

Quizplus · Accepted Answer

The long-run neutrality of money implies that in the long run, changes in the money supply do not affect real output. In this case, the unexpected monetary contraction shifts aggregate demand from AD1 to AD3, causing the economy to move from point A to B in the short run. However, in the long run, the economy will return to its original long-run equilibrium at point A, with output equal to Y and the price level equal to P1.

Use the Following to Answer Questions : Exhibit: AD-AS Shifts Yˉ\bar { Y }Yˉ

Use the Following to Answer Questions :
Exhibit: AD-AS Shifts $\bar { Y }$