If the short-run IS–LM equilibrium occurs at a level of income below the natural level of output, then in the long run the price level will , shifting the curve to the right and returning output to the natural level.

Related MCQs

• A decrease in the price level shifts the               curve to the right, and the aggregate demand curve .
• The short-run Aggregate Supply curve is upward sloping only because we assume that resource costs are held .
• An economy is at equilibrium output when
• Which factor would shift the Aggregate Demand curve to the right?
• In the quantity theory of money, P and Y represent the price and quantity of:
• The Phillips curve implied that there was a trade- off available to governments between:
• Which of the following events will shift the Aggregate Supply curve to the left?
• In the IS–LM model, the impact of an increase in government purchases in the goods market has ramifications in the money market, because the increase in income causes a(n) in money             .
• If inflation is 6% and you receive a 1% raise in your nominal wage, by how much did your real wage change?
• If inflation is 1% and you receive a 1% raise in your nominal wage, by how much did your real wage change?