Use the Following to Answer Questions

question 52

Multiple Choice

Use the following to answer questions .
Exhibit: Short-run Aggregate Supply
-(Exhibit: Short-run Aggregate Supply) Suppose that the economy is in long-run equilibrium at point A. Now suppose the stock market crashes, significantly reducing household wealth. As a result,

• A) the economy's potential output decreases to Y₃.
• B) unemployment is below its natural rate.
• C) the economy moves to a new long-run equilibrium at point C.
• D) there is some cyclical unemployment.

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