The diagram below shows an AD/AS model for a hypothetical economy.The economy begins in long-run equilibrium at point A. FIGURE 24-4
-Refer to Figure 24-4.Following the positive AS shock shown in the diagram,the adjustment process will take the economy to a long-run equilibrium where the price level is ________ and real GDP is ________.
A)60; 1000
B)60; 1300
C)90; 750
D)90; 1200
E)110; 1000

Question

The diagram below shows an AD/AS model for a hypothetical economy.The economy begins in long-run equilibrium at point A.  FIGURE 24-4
-Refer to Figure 24-4.Following the positive AS shock shown in the diagram,the adjustment process will take the economy to a long-run equilibrium where the price level is ________ and real GDP is ________.
A)60; 1000 
B)60; 1300 
C)90; 750 
D)90; 1200 
E)110; 1000

Quizplus · Accepted Answer

In the long-run equilibrium, the economy returns to its potential output level, which is typically the same as the initial real GDP before the shock. The price level adjusts to reflect the new equilibrium, which in this case is 110.

The Diagram Below Shows an AD/AS Model for a Hypothetical