Figure 33-3

Given the situation in graph (1) in Figure 33-3, what can be expected to change in graph (1) when the economy's self-correcting mechanism operates?

Question

Figure 33-3

Given the situation in graph (1) in Figure 33-3, what can be expected to change in graph (1) when the economy's self-correcting mechanism operates?

Quizplus · Accepted Answer

When the economy's self-correcting mechanism operates, it will lead to an increase in aggregate supply as resources are reallocated and prices adjust. This will shift the AS curve to the right, resulting in a new equilibrium point at a lower price level and a higher level of output. Therefore, the correct choice is D, aggregate supply decreases.

Figure 33-3 Given the Situation in Graph (1) in Figure 33-3, What