Figure 16-3
-Refer to Figure 16-3. Where does a decrease in aggregate demand move the economy from c and 3 to, in the short run and the long run?
A)a and 1 in the short run, b and 2 in the long run
B)b and 2 in the short run, a and 1 in the long run
C)d and 4 in the short run, e and 5 in the long run
D)b and 4 in the short run, e and 1 in the long run

Question

Figure 16-3 
-Refer to Figure 16-3. Where does a decrease in aggregate demand move the economy from c and 3 to, in the short run and the long run?
A)a and 1 in the short run, b and 2 in the long run 
B)b and 2 in the short run, a and 1 in the long run 
C)d and 4 in the short run, e and 5 in the long run 
D)b and 4 in the short run, e and 1 in the long run

Quizplus · Accepted Answer

A decrease in aggregate demand would shift the AD curve to the left, moving the economy from c and 3 to b and 2 in the short run. In the long run, prices and wages will adjust, causing the SRAS curve to shift to the left, and the economy will end up at a and 1. Thus, the correct answer is b and 2 in the short run, a and 1 in the long run.

Figure 16-3 -Refer to Figure 16-3. Where Does a Decrease in Aggregate