-Refer to Figure 15-10.Suppose that output in the economy is currently below full employment.If real GDP is $6.8 trillion and a demand shock lowers real GDP to $6.5 trillion,what would we expect to occur in the long run?
A) The aggregate supply curve will shift upward as wages fall.
B) The aggregate supply curve will shift downward as wages fall.
C) The aggregate demand curve will shift rightward as wages fall.
D) The aggregate demand curve will shift leftward as wages fall.
E) No further changes in aggregate supply or aggregate demand without government intervention.

Question

-Refer to Figure 15-10.Suppose that output in the economy is currently below full employment.If real GDP is $6.8 trillion and a demand shock lowers real GDP to $6.5 trillion,what would we expect to occur in the long run?
A) The aggregate supply curve will shift upward as wages fall. 
B) The aggregate supply curve will shift downward as wages fall. 
C) The aggregate demand curve will shift rightward as wages fall. 
D) The aggregate demand curve will shift leftward as wages fall. 
E) No further changes in aggregate supply or aggregate demand without government intervention.

Quizplus · Accepted Answer

In the long run, if the economy is below full employment, wages will fall, leading to a downward shift in the aggregate supply curve, which helps restore full employment output.