Figure 34-7
-Refer to Figure 34-7. Which of the following is correct?
A) A wave of optimism could move the economy from point a to point b.
B) If aggregate demand moves from AD1 to AD2, the economy will stay at point b in both the short run and long run.
C) It is possible that either fiscal or monetary policy might have caused the shift from AD1 to AD2.
D) All of the above are correct.

Question

Figure 34-7 
-Refer to Figure 34-7. Which of the following is correct?
A) A wave of optimism could move the economy from point a to point b. 
B) If aggregate demand moves from AD1 to AD2, the economy will stay at point b in both the short run and long run. 
C) It is possible that either fiscal or monetary policy might have caused the shift from AD1 to AD2. 
D) All of the above are correct.

Quizplus · Accepted Answer

The graph shows the aggregate demand and aggregate supply model. The shift from AD1 to AD2 could have been caused by either fiscal or monetary policy, so option C is correct. Option A is incorrect because a wave of optimism would shift the aggregate demand curve to the right or left, but it would not move the economy from point a to point b. Option B is incorrect because if the aggregate demand curve shifts from AD1 to AD2, the economy moves from point a to point b in the short run, but eventually, the economy would move to point c in the long run.

Figure 34-7 -Refer to Figure 34-7. Which of the Following Is Correct