Use the following to answer questions . Exhibit: Using the Aggregate Demand/Aggregate Supply Model 1 -(Exhibit: Using the Aggregate Demand/Aggregate Supply Model 1) Suppose the economy is initially in short-run equilibrium at B. Policy makers could either pursue a stabilization policy or allow the economy to adjust on its own. What is the difference between the two policy choices, if any? A) A stabilization policy would return real GDP to its potential at a price level of P_a while a nonintervention policy would return real GDP to its potential at a price level of P_d. B) A stabilization policy would return real GDP to its potential at a price level of P_d while a nonintervention policy would return real GDP to its potential at a price level of P_a. C) Both policies would return real GDP to its potential at a price level of P_a_. D) Both policies would return real GDP to its potential at a price level of P_d_.

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A stabilization policy would quickly adjust the economy to its potential GDP at a lower price level (P_a), while a nonintervention policy would allow the economy to adjust naturally, potentially resulting in a higher price level (P_d).

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