Beginning from a point of short-run equilibrium at point E₂ in Figure 10-18, the economy's movement to a new position of long-run equilibrium from that point would best be described as A)a movement along the AD₂ curve with a shift in the SRAS₁ curve to SRAS₂. B)a movement along the SRAS₂ curve with a shift in the AD₂ curve. C)a shift in the LRAS curve to an intersection at E₃. D)no shift of any kind.

Question

Quizplus · Accepted Answer

In the long run, the economy adjusts to a new equilibrium by moving along the aggregate demand curve (AD) while the short-run aggregate supply curve (SRAS) shifts to reflect changes in resource prices, wages, and expectations, reaching a new long-run equilibrium.

Beginning from a Point of Short-Run Equilibrium at Point E2

Beginning from a Point of Short-Run Equilibrium at Point E₂