Final answer:
In the long-run neoclassical model, after an increase in net exports, the new equilibrium has a higher price level, but output remains the same, matching option (a). Shifts in aggregate demand affect only the price level, not output, because of the vertical long-run AS curve.
Step-by-step explanation:
In the context of a long-run neoclassical analysis, after an increase in net exports, a sequence of events leads to economic output rising above potential GDP, and this causes a labor shortage with unemployment falling below the natural rate. Employers try to attract more workers by offering higher wages, which after a time increases production costs. This, in turn, results in a leftward shift in the short-run Keynesian aggregate supply curve back to SRAS₁, which causes an inflationary increase in the price level while output returns to its full-employment level.
So the new long-run equilibrium after the increase in net exports compares to the initial full-employment level before the increase in the following way: The price level is higher, but output remains the same. This corresponds to option (a) in the question presented.
The long-run Aggregate Supply (AS) curve is vertical, suggesting that shifts in aggregate demand do not alter the level of output but do lead to changes in the price level. Due to the natural rate of unemployment, unemployment is not affected by these changes either, which is represented by a vertical Phillips curve.
In this scenario, it would not be advisable to use aggregate demand management to alter the level of output, as it is at its full employment. Instead, policy might focus on controlling any inflationary increases in the price level that arise from increased aggregate demand beyond the long-run aggregate supply.