The diagram below shows an AD/AS model for a hypothetical economy which is initially in a short-run equilibrium at point A. FIGURE 24-6
-Refer to Figure 24-6.If the government takes no action to change the short-run macro equilibrium in this economy,then
A)the AD curve will shift downward until it intersects with the AS curve at point E.
B)the AD curve will shift upward until it intersects with the AS curve at point C.
C)the AS curve will shift to the left until it intersects with the AD curve at point D.
D)the AS curve will shift to the right until it intersects with the AD curve at point B.
E)the AS curve can either shift to the right or left depending on the fiscal policy.

Question

The diagram below shows an AD/AS model for a hypothetical economy which is initially in a short-run equilibrium at point A.  FIGURE 24-6
-Refer to Figure 24-6.If the government takes no action to change the short-run macro equilibrium in this economy,then
A)the AD curve will shift downward until it intersects with the AS curve at point E. 
B)the AD curve will shift upward until it intersects with the AS curve at point C. 
C)the AS curve will shift to the left until it intersects with the AD curve at point D. 
D)the AS curve will shift to the right until it intersects with the AD curve at point B. 
E)the AS curve can either shift to the right or left depending on the fiscal policy.

Quizplus · Accepted Answer

In the absence of government intervention, the economy will self-correct over time. Typically, this involves the AS curve shifting to the right as resources become more fully utilized and prices adjust, moving towards a new equilibrium at a higher output level, such as point B.

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