Figure 13-3
-Refer to Figure 13-3.Suppose the economy is at point A.If investment spending increases in the economy,where will the eventual long-run equilibrium be?
A)A
B)B
C)C

Question

Figure 13-3 
-Refer to Figure 13-3.Suppose the economy is at point A.If investment spending increases in the economy,where will the eventual long-run equilibrium be?
A)A 
B)B 
C)C

Quizplus · Accepted Answer

When investment spending increases in an economy, it leads to an increase in aggregate demand. Starting from point A, this increase in aggregate demand would initially move the economy towards a higher level of output and price, following the short-run aggregate supply curve. However, in the long run, as prices adjust, the economy would move to a new equilibrium point where the long-run aggregate supply curve intersects the new aggregate demand curve. This point is represented by C, indicating a higher price level and the same level of output as the full employment output does not change in the long run due to an increase in investment spending.

Figure 13-3 -Refer to Figure 13-3.Suppose the Economy Is at Point A.If