Figure 9.1

-Refer to Figure 9.1.Assume the economy is initially at point A.The initial change resulting from a recession caused by an increase in oil prices is best represented by which short-run equilibrium combination of price level and real GDP?

Question

Figure 9.1
Figure 9.1 -Refer to Figure 9.1.Assume the economy is initially at point A.The initial change resulting from a recession caused by an increase in oil prices is best represented by which short-run equilibrium combination of price level and real GDP? A) P₂; Y₂ B) P₃; Y₃ C) P₂; Y₃ D) P₃; Y₂

Figure 9.1 -Refer to Figure 9.1.Assume the economy is initially at point A.The initial change resulting from a recession caused by an increase in oil prices is best represented by which short-run equilibrium combination of price level and real GDP? A) P₂; Y₂ B) P₃; Y₃ C) P₂; Y₃ D) P₃; Y₂

-Refer to Figure 9.1.Assume the economy is initially at point A.The initial change resulting from a recession caused by an increase in oil prices is best represented by which short-run equilibrium combination of price level and real GDP?

Quizplus · Accepted Answer

A recession caused by an increase in oil prices would shift the short-run aggregate supply curve to the left. This would lead to a decrease in both price level and real GDP, as shown by the movement from point A to point B in the figure. The new short-run equilibrium combination of price level and real GDP is represented by the intersection of the new aggregate demand curve and the new short-run aggregate supply curve, which is point C. This corresponds to P2 and Y3. Therefore, the best choice is C.

Figure 9.1 -Refer to Figure 9.1.Assume the Economy Is Initially at Point