The figure given below depicts the long run equilibrium in an economy.
Figure 14.1
In the figure:
AD 1 and AD 2 : Aggregate demand curves
AS 1 and AS 2 : Aggregate supply curves
-Refer to Figure 14.1. Movement from point A to point C is equivalent to:

Question

The figure given below depicts the long run equilibrium in an economy.
Figure 14.1
  In the figure:
AD 1 and AD 2 : Aggregate demand curves
AS 1 and AS 2 : Aggregate supply curves
-Refer to Figure 14.1. Movement from point A to point C is equivalent to:

Quizplus · Accepted Answer

Movement from point A to point C is a movement down the long-run Phillips curve. This occurs because as the economy moves from point A (an inflationary gap) to point C (the long-run equilibrium), the unemployment rate decreases, and firms have to pay higher wages to attract workers. This leads to an increase in costs and a decrease in profits, causing firms to reduce output and prices in the long run, and eventually reaching the long-run equilibrium at point C where the short-run and long-run Phillips curves intersect at the natural rate of unemployment.

The Figure Given Below Depicts the Long Run Equilibrium in an Economy