Using Figure 1 above, if the aggregate demand curve shifts from AD3 to AD2 the result in the short run would be:
A. P3 and Y1.
B. P2 and Y1.
C. P2 and Y3.
D. P1 and Y2.
Answer: B
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Which of the following strategies will a government adopt to increase the production of a good?
a. An excise tax on producers b. An excise tax on consumers c. A subsidy to buyers d. A capital gains tax on producers
People will spend more if the price level
a. rises because rising prices increase the real value of the fixed quantity of money. b. rises because rising prices decrease the real value of a dollar. c. falls because falling prices increase the real value of a dollar. d. falls because falling prices decrease the real value of a dollar.
Classical economists believe that the aggregate supply curve is vertical because
A. people who are not working are those who have chosen not to work at the prevailing wage rate. B. the labor market is always in equilibrium. C. wages are flexible and they always change to clear the labor market. D. all of the above.
Refer to Figure 4-3. What area represents producer surplus at the equilibrium price of P1?
A) D + E B) D + E + G + H C) A + B + C + D + E D) A + B + D