Refer to the diagram. Assume that nominal wages initially are set on the basis of the price level P 2 and that the economy initially is operating at its full-employment level of output Q f . In the long run, an increase in the price level from P 2 to P 3 will:





A.  increase real output from Q f to Q 2 .

B.  change aggregate supply from AS 2 to AS 1 .

C.  decrease real output from Q 2 to Q 1 .

D.  move the economy from b to d.


D.  move the economy from b to d.

Economics

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