Beginning from a Point of Short-Run Equilibrium at Point E₂

question 142

Multiple Choice

Beginning from a point of short-run equilibrium at point E₂ in Figure 10-18, the economy's movement to a new position of long-run equilibrium from that point would best be described as

• A)a movement along the AD₂ curve with a shift in the SRAS₁ curve to SRAS₂.
• B)a movement along the SRAS₂ curve with a shift in the AD₂ curve.
• C)a shift in the LRAS curve to an intersection at E₃.
• D)no shift of any kind.

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Definitions:

Demand

The volume of goods or services that individuals are prepared and financially able to acquire at varying price points during a certain time span.

Perfectly Competitive Labor Market

A theoretical market where numerous employers and employees interact, with no single entity able to influence wages or working conditions.

Wages

The compensation received by employees for their labor, typically expressed as an hourly rate or annual salary.

Labor

Labor refers to the human effort, both physical and mental, used in the production of goods and services.