Use the graph to answer the question that follows. Price LRAS SRAS Level H AD₂ AD₁ 0 Output Assume that the economy is in the long-run equilibrium as shown on the accompanying graph. Which of the following best describes the self-correcting long-run adjustment if the economy had undergone a positive AD shock? Price will increase, short-run aggregate supply will shift leftwards in order to bring back the economy to its long-run equilibrium. The interest rate will go down, increasing the investment, thus further increasing the aggregate demand to attain the equilibrium. The long-run equilibrium can only be attained again if the long-run aggregate supply curve shifts outwards. Price will decrease, short-run aggregate supply will shift rightwards order to bring back the economy to its long-run equilibrium. Price will increase, short-run aggregate supply will shift rightwards in order to bring back the economy to its long-run equilibrium.

Use the graph to answer the question that follows. Price LRAS SRAS Level H AD₂ AD₁ 0 Output Assume that the economy is in the long-run equilibrium as shown on the accompanying graph. Which of the following best describes the self-correcting long-run adjustment if the economy had undergone a positive AD shock? Price will increase, short-run aggregate supply will shift leftwards in order to bring back the economy to its long-run equilibrium. The interest rate will go down, increasing the investment, thus further increasing the aggregate demand to attain the equilibrium. The long-run equilibrium can only be attained again if the long-run aggregate supply curve shifts outwards. Price will decrease, short-run aggregate supply will shift rightwards order to bring back the economy to its long-run equilibrium. Price will increase, short-run aggregate supply will shift rightwards in order to bring back the economy to its long-run equilibrium.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter8: Macroeconomic Equilibrium: Aggregate Demand And Supply

Section: Chapter Questions

Problem 20E

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