The economy is in long-run equilibrium. Suddenly, due to improved international relations, a boom experienced by a major trading partner, and the increased confidence of policymakers, citizens become more optimistic about the future and stay this way for a long time.

Refer to the Scenario 14-1. In the long-run, how does the change in price expectations created by optimism change the aggregate demand and aggregate supply diagram?

Question 21 options:

The long-run aggregate-supply curve shifts right.

The short-run aggregate-supply curve shifts right.

The short-run aggregate-supply curve shifts left.

The long-run aggregate-supply curve shifts left.