Exhibit 10.5 -Refer to Exhibit 10.5, Which Shows the Short-Run Equilibrium in the Short-Run

Exhibit 10.5

-Refer to Exhibit 10.5, which shows the short-run equilibrium in an aggregate demand-aggregate supply model. If the economy is currently producing Y₁ level of output, long-run equilibrium will be established if _____

A) the short-run aggregate supply curve shifts to the right to remove the expansionary gap.
B) the short-run aggregate supply curve shifts to the left to remove the expansionary gap.
C) the short-run aggregate supply curve shifts to the left to remove the recessionary gap.
D) the short-run aggregate supply curve shifts to the right to remove the recessionary gap.
E) there is a leftward shift of the aggregate demand curve.