what happens to the price level and real GDP in the long run when Aggregate Demand or Long Run Aggregate Supply change?
In the long run the real GDP does not change for any change in the aggregate demand. When aggregate demand increases in the short run, price level is likely to increase in the long run as well, but real GDP does not change. Similarly when aggregate demand decreases in the short run, price level is likely to fall even in the long run, but real GDP will still remain unchanged.
As far as the change in long run aggregate supply is concerned, price level falls and the real GDP rises, if the long run aggregate supply curve shifts to the right. When shifting to the left, price level increases while real GDP decreases in the long run.
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