If AD decreases in the short run and the government decides to let the economy fix itself what would happen in the long run

Question

Social Studies

Julio Huffman

15 January, 09:34

If AD decreases in the short run and the government decides to let the economy fix itself what would happen in the long run

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Answers (2)

Know the Answer?

Arroyo · Answer 1

Answer: AS would shift to the right

Alice Romero · Answer 2

If AD changes, then output and unemployment will change in the short run, but not in the long run. As a result, output increases and unemployment decreases. Unfortunately, this positive AD shock also means that inflation increases: An increase in AD leads to an increase in real GDP and the price level.