Figure 12-2 -Refer to Figure 12-2. Assume That the Economy Is Initially

question 38

Multiple Choice

Figure 12-2
-Refer to Figure 12-2. Assume that the economy is initially at Y_r. A nonintervention policy Jwould return the economy to its potential output by

• A) allowing the short-run aggregate supply to shift to the right.
• B) allowing the short-run aggregate supply to shift to the left.
• C) allowing the aggregate demand to shift to the left.
• D) allowing the aggregate demand to shift to the right.

---

Definitions:

Market Demand

The total quantity of a good or service that all consumers in a market are willing and able to purchase at various prices.

Individual Demand Curves

Graphical representations showing the relationship between the price of a good and the quantity demanded by an individual consumer, holding other factors constant.

Public Goods

Goods that are non-excludable and non-rivalrous, meaning they can be used by anyone and one person's use does not reduce its availability to others.

Free-Rider Problem

A situation where individuals consume a public good without contributing to its cost, benefiting from the good without paying for it.