Suppose that exports fall. Which of the following describes how the economy will adjust on its own in the long run? a) Nominal wages and other input prices will rise, shifting the short run aggregate supply curve shifts to the left until the economy is back in long run equilibrium. b) Nominal wages and other input prices will fall. Consequently, the short run aggregate supply curve shifts to the right until the economy is back in long run equilibrium. c) High unemployment contributes to a lower price level. This increases aggregate demand, and the AD curve shifts to the right until the economy is back in long run equilibrium.

Suppose that exports fall. Which of the following describes how the economy will adjust on its own in the long run? a) Nominal wages and other input prices will rise, shifting the short run aggregate supply curve shifts to the left until the economy is back in long run equilibrium. b) Nominal wages and other input prices will fall. Consequently, the short run aggregate supply curve shifts to the right until the economy is back in long run equilibrium. c) High unemployment contributes to a lower price level. This increases aggregate demand, and the AD curve shifts to the right until the economy is back in long run equilibrium.

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter33: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 5PA

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