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Suppose the country of Isaias-opolis has a major increase in investment. Using the AD-AS Model and...

Suppose the country of Isaias-opolis has a major increase in investment. Using the AD-AS Model and assuming the country is initially in its long run equilibrium, what will be the effect in the long run?

Group of answer choices

Price level rises and output is unchanged

Price level rises and output rises

Price level falls and output rises

Price level falls and output is unchanged

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Answer #1

If the investment decrease in the market that will shift the AD curve to the left and that will decrease the output and price in the market, in the long run the price level will be even more lower and output will be back at the potential level.

The answer is "D" the price level will fall and output is unchanged.

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