When Expected Price Level Decreases What Happens To The Short Run And Long Run Aggregate Supply Curves Nothing Happens 1 (254.83 KiB) Viewed 21 times
When expected price level decreases, what happens to the short-run and long-run aggregate supply curves? Nothing happens to the short-run aggregate supply curve. The long-run aggregate supply curve shifts to the left. The short-run aggregate supply curve shifts down. Nothing happens to the long- run aggregate supply, curve. . Nothing happens to the short-run aggregate supply curve. The long-run aggregate supply curve shifts to the right. The short-run aggregate supply curve shifts up. Nothing happens to the long-run aggregate supply curve.
Suppose an economy is initially in a long-run equilibrium. The policy makers decide to exploit the negatively sloping short-run Phillips Curve by reducing unemployment at the cost of higher inflation. What is likely to happen in the long run? Nothing will happen. Unemployment will stay low but inflation will go back to its original level. Unemployment will increase until it goes back to its original level. Unemployment will further decrease and inflation will further increase.
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