Assume that an economy is in long-run macroeconomic equilibrium. All the usual a

Question

Assume that an economy is in long-run macroeconomic equilibrium. All the usual assumptions of the dynamic demand and supply model hold. Firms and workers expect there to be a decline in the inflation rate in the coming year As a result, the LRAS curve wil ?1 (Shift Left/Right/Remain unchanged) The SRAS curve will ? . (Shift Left/Right/Remain unchanged) Shift Left/Right/Remain Unchanged) The AD curve will The new long-run equilibrium will be where OA. the new aggregate demand curve intersects the new short-run aggregate supply curve on the original long-run B. the new aggregate demand curve intersects the new short-run aggregate supply curve on the new long-run aggregate OC. the new aggregate demand curve intersects the original aggregate demand curve. aggregate supply curve supply curve. O D. the new aggregate demand curve intersects the original short-run aggregate supply curve on the original long-run aggregate supply curve

Explanation / Answer

LRAS will remain unchanged

SRAS will remain uncahnged

AD curve will shift to left

option B is correct. the new long run equilibrium will be where new AD intersect the original SRAS on original LRAS curve.

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