Figure 10-3

When the economy represented in Figure 10-3 has completed the self-correcting adjustment process, the expenditure line in graph (a) will be

Question

Figure 10-3

When the economy represented in Figure 10-3 has completed the self-correcting adjustment process, the expenditure line in graph (a) will be

Quizplus · Accepted Answer

The self-correcting adjustment process involves a shift of the aggregate supply curve to the right, resulting in lower price levels and higher real GDP. This shift will move the equilibrium point to the right, causing the expenditure line to intersect the new aggregate demand curve at a lower level of GDP. Therefore, the expenditure line will be lower, indicating a decrease in aggregate demand.

Figure 10-3 When the Economy Represented in Figure 10-3 Has Completed the Has