FIGURE 24-2 -Refer to Figure 24-2.Suppose the economy is in equilibrium at Y₁.The economy's automatic adjustment process will restore potential output,Y^*,through A)wage increases and a leftward shift of the AS curve. B)wage increases and a rightward shift in the AS curve. C)wage decreases and a rightward shift of the AD curve. D)an increase in potential GDP to intersect both the AD and AS curves at B. E)a leftward shift of the AD to intersect both the AS and potential GDP at A.

Question

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The economy is in equilibrium at Y1. The automatic adjustment process will restore potential output, Y*, through wage increases and a leftward shift of the AS curve.

FIGURE 24-2 -Refer to Figure 24-2.Suppose the Economy Is in Equilibrium at Equilibrium