FIGURE 24-5

-Refer to Figure 24-5.If the economy is currently in equilibrium at E3,the concept of asymmetrical adjustment of the AS curve suggests that
A)the economy will attain potential output faster if there is no intervention by the government.
B)a decrease in the price level will induce a rightward shift of AS.
C)the return of the economy to potential output may be very slow without government intervention.
D)the economy will never return to potential output.
E)the price level is constant regardless of the level of equilibrium income.

Question

FIGURE 24-5

-Refer to Figure 24-5.If the economy is currently in equilibrium at E3,the concept of asymmetrical adjustment of the AS curve suggests that
A)the economy will attain potential output faster if there is no intervention by the government. 
B)a decrease in the price level will induce a rightward shift of AS. 
C)the return of the economy to potential output may be very slow without government intervention. 
D)the economy will never return to potential output. 
E)the price level is constant regardless of the level of equilibrium income.

Quizplus · Accepted Answer

The concept of asymmetrical adjustment of the AS curve suggests that the economy can recover from a recession relatively quickly if the AS curve shifts right due to external factors such as technological advancements or increased productivity. However, if the AS curve shifts left due to factors such as a decrease in resources, the economy may not return to potential output quickly without government intervention. Therefore, if the economy is currently in equilibrium at E3, the return of the economy to potential output may be very slow without government intervention. Option A is incorrect because the government intervention may help the economy to attain potential output faster. Option B is incorrect because a decrease in the price level causes a movement along the AS curve, not a shift. Option D is incorrect because the economy can eventually return to potential output with government intervention. Option E is incorrect because the price level varies with the level of equilibrium income.

FIGURE 24-5 -Refer to Figure 24-5.If the Economy Is Currently in Equilibrium