??Exhibit 16A-2 Macro AD/AS Models
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In Panel (b) of Exhibit 16A-2, the economy is initially in short-run equilibrium at real GDP level Y1 and price level P2. Classical theory argues that:
A. SRAS will shift to leftward and establish full employment at P3Yp without government intervention.
B. higher wages will result in a rightward shift of SRAS.
C. long-run equilibrium will be established at Yp and P1.
D. lower wages will result in a leftward shift of SRAS.
Answer: A
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