Question

In the long run, the aggregate supply curve is ______. Therefore, shift in aggregate demand affect the ________ but not _______. In the short run, the aggregate supply curve is _______. Therefore, shifts in aggregate demand affect __________.

Answer 1

In the long run, shifts in aggregate demand affect only the price level but not output. In the short run, shifts in aggregate demand affect both output and price level.

Step-by-step explanation:

In the long run, the aggregate supply curve is vertical. Therefore, shifts in aggregate demand affect only the price level but not output. In the short run, the aggregate supply curve is upward sloping. Therefore, shifts in aggregate demand affect both output and price level.