Question

Take a look at the panel (a) of Figure 10-6. In the absence of a change in aggregate demand, what effect does economic growth have on the price level over time, other things being equal? Why?

Short answer

Over the long haul, a financial development pushes the costs to a lower level (flattening), considering that the total interest and any remaining elements stay unaltered.

Step-by-step solution

introduction

Any adjustment of the condition of creative innovation and amount/nature of variable sources of info causes the LRAS bend to move to one side.

explanation

This infers that expanded capacity or efficiency permits the economy to deliver labour and products at a more elevated level. As the AD stays unaltered, in the event that the cost level doesn't fall, there will be an abundance of unsold supply of labour and products in the economy over the long haul. This is shown by EA in the chart underneath.