The figure below shows short-run equilibrium in an aggregate demand-aggregate supply model.If the economy is currently producing Y1 level of output,long-run equilibrium will be established if:

A)the short-run aggregate supply curve shifts to the right to remove the expansionary gap.
B)the short-run aggregate supply curve shifts to the left to remove the expansionary gap.
C)the short-run aggregate supply curve shifts to the left to remove the recessionary gap.
D)the short-run aggregate supply curve shifts to the right to remove the recessionary gap.
E)there is a leftward shift of the aggregate demand curve.

Question

The figure below shows short-run equilibrium in an aggregate demand-aggregate supply model.If the economy is currently producing Y1 level of output,long-run equilibrium will be established if:

A)the short-run aggregate supply curve shifts to the right to remove the expansionary gap. 
B)the short-run aggregate supply curve shifts to the left to remove the expansionary gap. 
C)the short-run aggregate supply curve shifts to the left to remove the recessionary gap. 
D)the short-run aggregate supply curve shifts to the right to remove the recessionary gap. 
E)there is a leftward shift of the aggregate demand curve.

Quizplus · Accepted Answer

The Answer of The figure below shows short-run equilibrium in an aggregate demand-aggregate supply model.If the economy is currently producing Y1 level of output,long-run equilibrium will be established if:

A)the short-run aggregate supply curve shifts to the right to remove the expansionary gap. 
B)the short-run aggregate supply curve shifts to the left to remove the expansionary gap. 
C)the short-run aggregate supply curve shifts to the left to remove the recessionary gap. 
D)the short-run aggregate supply curve shifts to the right to remove the recessionary gap. 
E)there is a leftward shift of the aggregate demand curve.

The Figure Below Shows Short-Run Equilibrium in an Aggregate Demand-Aggregate