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

question 119

Multiple Choice

The diagram below shows an AD/AS model for a hypothetical economy which is initially in a short-run equilibrium at point A. FIGURE 24-7 Refer to Figure 24-7.If the government takes no action to close the existing output gap,then

• A)the AD curve will shift down until it intersects with the AS curve at point D.
• B)the AD curve will shift up until it intersects with the AS curve at point B.
• C)the AS curve will shift to the left until it intersects with the AD curve at point C.
• D)the AS curve will shift to the right until it intersects with the AD curve at point E.
• E)the AS curve can either shift to the right or left depending on the fiscal policy.