With an aid of AS-AD diagram, explain the effect on price level and output when investment expenditure increases in the short run and the cost of production decreases in the long run

When investment increases, the aggregate demand increases. The price level will increase and the output level will also increase.

In the long run, when the product cost decreases, the short run aggregate supply decreases. The price level will increase and the output level will decrease. Overall, the price level increases and the output level remain unchanged.