Scenario 14-1

Scenario 14-1. The economy is in long-run equilibrium. Suddenly, due to improved international relations and the increased confidence of policymakers, citizens become more optimistic about the future and stay this way for a long time.
-Refer to 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?

A) The long-run aggregate supply curve shifts left.
B) The long-run aggregate supply curve shifts right.
C) The short-run aggregate supply curve shifts right.
D) The short-run aggregate supply curve shifts left.

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