-Refer to the above graph.The economy is at point B₂,and aggregate demand increases.In the short run,the economy will: A) stay at point B₂. B) move to point C₂ and in the long run to B₃. C) move to point B₃ and in the long run to C₂. D) move to point B₁ and in the long run to B₁.

Question

Quizplus · Accepted Answer

In the short run, an increase in aggregate demand will move the economy from point B2 to C2 due to higher output and price levels. In the long run, the economy will adjust back to the natural level of output at B3 as prices and wages adjust.

-Refer to the Above Graph