The Diagram Below Shows an AD/AS Model for a Hypothetical

question 45

Multiple Choice

The diagram below shows an AD/AS model for a hypothetical economy.The economy begins in long-run equilibrium at point A. FIGURE 24-3 Refer to Figure 24-3.After the negative aggregate demand shock shown in the diagram (from to ) ,which of the following describes the adjustment process that would return the economy to its long-run equilibrium?

• A)Wages would eventually fall,causing the AD curve to shift to the right,returning to the original equilibrium at point A.
• B)Wages would eventually fall,causing the AS curve to shift slowly to the right,reaching a new equilibrium at point E.
• C)Wages would increase,causing the AS curve to shift to the right,reaching a new equilibrium at point E.
• D)Wages would increase,causing the AD curve to shift to the right,returning to the original equilibrium at point A.
• E)Potential output would decrease from 1000 to 900 and a new long-run equilibrium would be established at point D.

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Definitions:

Naturalistic Observation

A research method in which subjects are observed in their natural environment without any manipulation by the observer.

American Psychiatric Association

A professional organization of psychiatrists dedicated to the diagnosis, treatment, prevention, and research of mental illnesses.

DSM-5

The fifth edition of the Diagnostic and Statistical Manual of Mental Disorders, a publication by the American Psychiatric Association that classifies and provides criteria for the diagnosis of mental disorders.

Observer Bias

The tendency for observers to see what they expect to see, or to interpret data in a way that reflects their own preconceptions.