When the Economy Experiences a Permanent Supply Side Shock That

question 135

Multiple Choice

When the economy experiences a permanent supply side shock that shifts the long-run aggregate supply to the right, the short run aggregate supply curve will:

• A) instantly shift left with the long-run aggregate supply to the new long-run equilibrium.
• B) begin by shifting left initially, and then be pulled right by the long-run aggregate supply over time.
• C) gradually shift right until it reaches long-run aggregate supply and the new long-run equilibrium.
• D) None of these is true.

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