Refer to the information provided in Figure 11.8 below to answer the questions that follow. Figure 11.8
-Refer to Figure 11.8. If the economy is at point A currently producing Y₀ and the Z factors increase, the economy will move to Point ________ in the short run and to Point ________ in the long run.

Question

Refer to the information provided in Figure 11.8 below to answer the questions that follow.

Figure 11.8
-Refer to Figure 11.8. If the economy is at point A currently producing Y₀ and the Z factors increase, the economy will move to Point ________ in the short run and to Point ________ in the long run.

Quizplus · Accepted Answer

An increase in the Z factors (factors that shift the aggregate supply curve) initially moves the economy to a point where output is higher and prices are lower (Point D), reflecting an outward shift in the short-run aggregate supply curve. In the long run, as prices and wages adjust, the economy moves to a new equilibrium where output returns to its natural rate but at a higher price level (Point E), indicating a shift in the long-run aggregate supply curve.

Refer to the Information Provided in Figure 11