Exhibit 11-6
-In Exhibit 11-6, long-run equilibrium would be established by
A)an increase in short-run aggregate supply to remove the expansionary gap
B)a decrease in short-run aggregate supply to remove the expansionary gap
C)a decrease in short-run aggregate supply to remove the contractionary gap
D)an increase in short-run aggregate supply to remove the contractionary gap
E)a leftward shift of the aggregate demand curve

Question

Exhibit 11-6 
-In Exhibit 11-6, long-run equilibrium would be established by
A)an increase in short-run aggregate supply to remove the expansionary gap 
B)a decrease in short-run aggregate supply to remove the expansionary gap 
C)a decrease in short-run aggregate supply to remove the contractionary gap 
D)an increase in short-run aggregate supply to remove the contractionary gap 
E)a leftward shift of the aggregate demand curve

Quizplus · Accepted Answer

In long-run equilibrium, an increase in short-run aggregate supply would remove a contractionary gap by increasing output to meet potential GDP.

Exhibit 11-6 -In Exhibit 11-6, Long-Run Equilibrium Would Be Established by