-Refer to Exhibit 9-4.Assume the economy is self-regulating and currently is in long-run equilibrium with the price level equal to P₅.If something happens that shifts the AD curve to the AD₁ position,the economy will eventually settle down at a long-run equilibrium point of __________.

Question

-Refer to Exhibit 9-4.Assume the economy is self-regulating and currently is in long-run equilibrium with the price level equal to P<sub>5</sub>.If something happens that shifts the AD curve to the AD<sub>1</sub> position,the economy will eventually settle down at a long-run equilibrium point of __________. A) P<sub>5</sub>,Q<sub>3</sub>. B) P<sub>4</sub>,Q<sub>4</sub>. C) P<sub>3</sub>,Q<sub>3</sub>. D) P<sub>3</sub>,Q<sub>5</sub>. E) P<sub>4</sub>,Q<sub>2</sub>.

Quizplus · Accepted Answer

In a self-regulating economy, shifts in the aggregate demand (AD) curve will eventually lead to a new long-run equilibrium where the price level and output adjust to return to the full-employment level of output. The correct choice indicates a new equilibrium price level and output level that are consistent with the economy's return to its full-employment output, following the principles of macroeconomic theory.