Figure 33-2. -Refer to Figure 33-2.Suppose the economy starts at Z.If changes occur that move the economy to a new short run equilibrium of P₃ and Y₃,then it must be the case that A) short run aggregate supply has decreased. B) short run aggregate supply has increased. C) aggregate demand has increased. D) aggregate demand has decreased.

Question

Quizplus · Accepted Answer

The new short run equilibrium point (P₃ and Y₃) is to the right of the original equilibrium point Z. This means that output has increased. Since output is a function of both aggregate demand and short run aggregate supply, it can be concluded that short run aggregate supply has increased (shifting to the right) to allow for the increase in output. Therefore, choice B is the correct answer.

Figure 33-2. -Refer to Figure 33-2.Suppose the Economy Starts at Z.If Changes