Figure 8-5

-In Figure 8-5 above,from initial point A in the top diagram AD₀ shifts to AD₁,while the nominal wage remains constant.Short-run equilibrium occurs at point
A)G.
B)B.
C)C.
D)D.
E)F.

Question

Figure 8-5
 
-In Figure 8-5 above,from initial point A in the top diagram AD₀ shifts to AD₁,while the nominal wage remains constant.Short-run equilibrium occurs at point
A)G. 
B)B. 
C)C. 
D)D. 
E)F.

Quizplus · Accepted Answer

The shift of AD curve from AD₀ to AD₁ with a constant nominal wage leads to a decrease in short-run equilibrium output and a decrease in the price level. Point B represents the new short-run equilibrium as it is the intersection point of the AD₁ and SRAS curves. At B, output level falls and the price level decreases, which is consistent with the shift from AD₀ to AD₁. Therefore, point B is the best choice for short-run equilibrium.

Figure 8-5 -In Figure 8-5 Above,from Initial Point a in the Top