Refer to the Above Diagram

question 180

Multiple Choice

Refer to the above diagram.If the price level rises above P₁ because of an increase in aggregate demand, the:

• A)economy will move up along curve B and output will temporarily increase.
• B)long-run aggregate supply curve C will shift upward.
• C)short-run aggregate supply curve B will automatically shift to the right.
• D)economy's output first will decline, then increase, and finally return to Q₁.

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Definitions:

Liquidity

The ease with which an asset or security can be converted into cash without affecting its market price.

Speculators

Investors who attempt to profit from market volatility by buying and selling stocks or other financial instruments, often taking higher risks.

Hedgers

Individuals or entities that enter financial contracts to reduce exposure to risk, typically by locking in prices for commodities or currencies.

Positions

Refers to the holdings or inventory of investments or trading assets owned by institutions or individuals.