In the long run decrease in aggregate demand brings along the following effects:

• as the unemployment is very high now, there is strong pressure on wages to fall
• while in the short run this pressure does not affect sticky wages, in the long run this pressure will result in decrease in factor prices (including wage rates)
• as a consequence, producers face lower factor prices and are able to lower product prices which decreases inflation
• lower inflation will stimulate total real aggregate expenditures and as a result producers increase their production quantities
• it means that real GDP returns to its potential level and unemployment returns to its natural rate level.

Long run developments induced by decrease in AS are shown graphically below.