Figure 26-12 -Refer to Figure 26-12. in the Dynamic AD-AS Model, If

question 205

Multiple Choice

Figure 26-12
-Refer to Figure 26-12. In the dynamic AD-AS model, if the economy is at point A in year 1 and is expected to go to point B in year 2, and the Federal Reserve pursues no policy, then at point B

• A) firms are producing above capacity.
• B) there is pressure on wages and prices to fall.
• C) the unemployment rate is greater than the natural rate of unemployment.
• D) incomes and profits are falling.

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