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Figure: Policy Alternatives
-(Figure: Policy Alternatives) Refer to Figure: Policy Alternatives. If the economy is in equilibrium at Y₁ in panel (b) and the government does not intervene, the result will likely be a shift of:

Question

Use the following to answer questions:
Figure: Policy Alternatives

-(Figure: Policy Alternatives) Refer to Figure: Policy Alternatives. If the economy is in equilibrium at Y₁ in panel (b) and the government does not intervene, the result will likely be a shift of:

Quizplus · Accepted Answer

If the economy is in equilibrium at Y1 and the government does not intervene, the economy will self-correct over time. This typically involves the short-run aggregate supply (SRAS) shifting to the right as wages and prices adjust downward, moving the economy back to its potential output.

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