If a negative supply shock causes the short-run aggregate supply curve to shift left, what will happen in the short run and what will happen in the long run? Assume government policymakers do not intervene. a) In the short run, output will decrease, and the price level will increase; in the long run, output returns to its original level, but the price level is now permanently higher. b)In the short run, output will increase, and the price level will decrease; in the long run, output returns to its original level, but the price level is now permanently higher. c)In the short run, output will decrease, and the price level will increase; in the long run, output and the price level return to their original levels. d)In the short run, output will decrease, and the price level will decrease; in the long run, output returns to its original level, but the price level is now permanently higher.
If a negative supply shock causes the short-run aggregate supply curve to shift left, what will happen in the short run and what will happen in the long run? Assume government policymakers do not intervene. a) In the short run, output will decrease, and the price level will increase; in the long run, output returns to its original level, but the price level is now permanently higher. b)In the short run, output will increase, and the price level will decrease; in the long run, output returns to its original level, but the price level is now permanently higher. c)In the short run, output will decrease, and the price level will increase; in the long run, output and the price level return to their original levels. d)In the short run, output will decrease, and the price level will decrease; in the long run, output returns to its original level, but the price level is now permanently higher.
Chapter14: Aggregate Demand And Supply
Section: Chapter Questions
Problem 9SQP
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If a negative supply shock causes the short-run aggregate supply curve to shift left, what will happen in the short run and what will happen in the long run? Assume government policymakers do not intervene.
a) In the short run, output will decrease, and the price level will increase; in the long run, output returns to its original level, but the price level is now permanently higher.
b)In the short run, output will increase, and the price level will decrease; in the long run, output returns to its original level, but the price level is now permanently higher.
c)In the short run, output will decrease, and the price level will increase; in the long run, output and the price level return to their original levels.
d)In the short run, output will decrease, and the price level will decrease; in the long run, output returns to its original level, but the price level is now permanently higher.
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