Consider the Dynamic AS/AD model from class. Assume the economy currently (time t) is in a short run equilibrium that happens to coincide with a long run equilibrium. Suppose that the potential output decrease. How sensitive (not in absolute value) is equilibrium output to the decrease in the long-run output?
A. 1
B. (φ + (1+αθY/αθπ) )^(-1)
C. -1
D. (φ + (1+αθY/αθπ))