If the Economy Shown in the Figure Begins on AD₁

question 29

Multiple Choice

If the economy shown in the figure begins on AD₁ and SRAS₁, what will happen in the short run and long run if the government begins a sustained period of increased spending?

• A) The economy moves from point C to E to B.
• B) The economy moves from point D to C to A.
• C) The economy moves from point D to C to E.
• D) The economy moves from point C to A to B.

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Definitions:

Payment

Payment refers to the transfer of money or goods from one party to another in exchange for goods, services, or to fulfill a legal obligation.

Outstanding Balance

The amount of money that is still owed or due on a financial account or loan.

Invoice

A document issued by a seller to a buyer that lists goods or services provided along with their costs, signifying an obligation to pay.

Payment

The act of giving money in exchange for goods, services, or to fulfill an obligation.