Refer to the information provided in Figure 12.8 below to answer the questions that follow. Figure 12.8
-Refer to Figure 12.8.This economy cannot continue to produce Y1 (or at point B)because
A)the price of raw material and wages will increase shifting the aggregate supply curve to AS1.
B)the price of inputs will decrease,shifting the aggregate supply curve to AS2.
C)the price of raw material will increase,shifting the aggregate demand curve to AD2.
D)all of the above

Question

Refer to the information provided in Figure 12.8 below to answer the questions that follow.  Figure 12.8
-Refer to Figure 12.8.This economy cannot continue to produce Y1 (or at point B)because
A)the price of raw material and wages will increase shifting the aggregate supply curve to AS1. 
B)the price of inputs will decrease,shifting the aggregate supply curve to AS2. 
C)the price of raw material will increase,shifting the aggregate demand curve to AD2. 
D)all of the above

Quizplus · Accepted Answer

The economy cannot continue to produce Y1 (or at point B) because as the economy produces more output, the demand for inputs such as raw materials and wages increases, causing an increase in the cost of production. This will shift the aggregate supply curve from AS2 to AS1, resulting in higher prices and lower output. Therefore, option A is the best choice. Options B and C are incorrect because they do not explain why the economy cannot continue to produce at Y1.

Refer to the Information Provided in Figure 12