Figure 24-4
-Refer to Figure 24-4. Given the economy is at point A in year 1, what will happen to the price level in year 2?
A) It will rise.
B) It will fall.
C) It will remain constant.
D) not enough information to answer the question

Question

Figure 24-4 
-Refer to Figure 24-4. Given the economy is at point A in year 1, what will happen to the price level in year 2?
A) It will rise. 
B) It will fall. 
C) It will remain constant. 
D) not enough information to answer the question

Quizplus · Accepted Answer

The economy is at point A, which is above the LRAS. This means that the economy is operating at a higher price level than the long-run equilibrium price level. In the long run, the economy will move back to the LRAS, which means that the price level will fall.

Figure 24-4 -Refer to Figure 24-4. Given the Economy Is at Point