Question

Suppose that during a given year, the quantity of U.S. real GDP that can be produced in the long run rises from $17.9$trillion to$18.0$ trillion, measured in base year dollars. During the year, no change occurs in the various factors that influence aggregate demand. What will happen to the U.S. long-run equilibrium price level during this particular year?

Short answer

The U.S. future equilibrium indicator will decline during this particular yearthanks to the presence of stable aggregate demand.

Step-by-step solution

Given Information

Aggregate demand givesthe assorted quantities of all final goods and services which are demanded at various corresponding price levels, keeping all other things constant. Aggregate supply showsthe varied quantities of all goods and services which the firms areable to trade at a specifiedperiod of time.

Explanation

In this question, the real GDP has been increased from $17.9$trillion to $18$ trillion which suggests the LRAS curve has been increased vertically to $18$ trillion and aggregate demand will remain the identical because it is on condition that no change occurswithin the various factors that influence aggregate demand.
The following diagram shows real GDP and price level:

Equilibrium occurs at some extent where the combination demand and aggregate supply curves intersect. Similarly, equilibrium indicator occurs at some extent where the mixture demand curve crosses the long term Aggregate supply curves (LRAS).

Stable

Whenthe combination demandisn't changing but real GDP increases,that the growing economy is experiencing deflation or sometimes called secular deflationwhich implies endless decline in prices resulting fromeconomic process within the presence of constant aggregate demand.

Hence, the U.S.future equilibriumindicator will decline during this particular yearthanks to the presence of stable aggregate demand.