Refer to the information provided in Figure 13.2 below to answer the questions that follow. Figure 13.2
-Refer to Figure 13.2.Firms respond to an increase in government spending by mostly raising their prices when the aggregate demand curve shifts from
A)AD1 to AD2.
B)AD3 to AD4.
C)AD5 to AD6.
D)AD6 to AD1.

Question

Refer to the information provided in Figure 13.2 below to answer the questions that follow.  Figure 13.2
-Refer to Figure 13.2.Firms respond to an increase in government spending by mostly raising their prices when the aggregate demand curve shifts from
A)AD1 to AD2. 
B)AD3 to AD4. 
C)AD5 to AD6. 
D)AD6 to AD1.

Quizplus · Accepted Answer

When the aggregate demand curve shifts from AD5 to AD6, the economy is likely operating near or at full capacity, leading firms to raise prices rather than increase output significantly.

Refer to the Information Provided in Figure 13