Figure 15-1

-Refer to Figure 15-1. If the economy starts at A and moves to D in the short run, the economy
A) moves to A in the long run.
B) moves to B in the long run.
C) moves to C in the long run.
D) stays at D in the long run.

Question

Figure 15-1
 
-Refer to Figure 15-1. If the economy starts at A and moves to D in the short run, the economy
A) moves to A in the long run. 
B) moves to B in the long run. 
C) moves to C in the long run. 
D) stays at D in the long run.

Quizplus · Accepted Answer

The movement from A to D in the short run is a result of an increase in aggregate demand. However, in the long run, the economy will move towards the natural rate of output, which is at point C. Therefore, the economy will move from D to C in the long run.

Figure 15-1 -Refer to Figure 15-1. If the Economy Starts at a Economy