-Refer to Exhibit 16-2.Suppose the economy starts out at point A and the public correctly anticipates that the AD curve will shift from AD₁ to AD₂.If wages are temporarily fixed,SRAS₁ will __________ and the economy will end up at point __________.

Question

-Refer to Exhibit 16-2.Suppose the economy starts out at point A and the public correctly anticipates that the AD curve will shift from AD<sub>1</sub> to AD<sub>2</sub>.If wages are temporarily fixed,SRAS<sub>1</sub> will __________ and the economy will end up at point __________. A) shift; D B) shift; B C) not shift; D D) not shift; E

Quizplus · Accepted Answer

DIf the public correctly anticipates an increase in aggregate demand and wages are temporarily fixed, the short-run aggregate supply (SRAS) curve does not shift immediately. The economy moves along the SRAS curve to a new equilibrium point, which is point D, where the new AD curve intersects the existing SRAS curve.