If the economy is operating above the natural rate of output and the FED along w

Question

If the economy is operating above the natural rate of output and the FED along with Congress decided to do nothing, what will eventually happen in the long run? O The factors of production (labor and capital) will eventually adjust moving the short- run supply curve to the right O The factors of production (labor and capital) will eventually adjust moving the short- run supply curve to the left O The factors of production (labor and capital) will eventually adjust moving the aggregate demand curve to the left O The factors of production (labor and capital) will eventually adjust moving the aggregate demand curve to the right

Explanation / Answer

Since we are operating at more than the full enoloemplo level, our SRAS-AD CUT beyond the full employment level. So, in the long run, our SRAS will shift to the left to reach the full employment level.

This is given in option B .

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