Question

What causes the economy to move from its short-run equilibrium to its long-run equilibrium? the government must increase spending to increase aggregate demand. nominal wages, prices, and perceptions will adjust upward to this new price level. the government must increase taxes to curb aggregate demand. nominal wages, prices, and perceptions will adjust downward to this new price level?

Answer 1

An economy moves from short-run equilibrium to its long run equilibrium as a result of the upward adjustment of minimal wages, prices, and perceptions to a new price level. If government spending increases, total demand will increase as well.