Refer to the above graph. The ratchet effect would suggest that:
A) if AD1 moves to AD2, the new equilibrium would be at b.
B) if AD1 moves to AD2, the new equilibrium would be at c.
C) if AD2 moves to AD1, the new equilibrium would be at a.
D) if AD2 moves to AD1, the new equilibrium would be at b.
Correct Answer:
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A) when aggregate