Consider the Basic AD/AS Macro Model, Initially in a Long-

question 35

Multiple Choice

Consider the basic AD/AS macro model, initially in a long- run equilibrium. A positive AS shock will the price level and output in the short run. In the long run, the price level will and output .

• A)increase; increase; return to its initial level; will be restored to potential output
• B)increase; increase; decrease; will be restored to potential output
• C)decrease; increase; decrease further; will be restored to potential output
• D)decrease; decrease; decrease further; will decrease further
• E)decrease; increase; return to its initial level; will be restored to potential output

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