Figure 7-6 -Refer to Figure 7-6. Suppose the Economy Is Initially at Is

question 159

Multiple Choice

Figure 7-6
-Refer to Figure 7-6. Suppose the economy is initially at A. Now suppose an increase in government purchases shifts the aggregate demand curve to AD₂. Which of the following is false about the economy after it adjusts to its new long-run equilibrium?

• A) Nominal wages increase.
• B) The price level rises to P_d.
• C) Firms employ more workers than in the short-run equilibrium.
• D) There is some frictional and structural unemployment.

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