Refer to the Graph $A D _ { 1 }$ Intersects A

question 181

Multiple Choice

Refer to the graph. Assume that the economy is in initial equilibrium where AD $A D _ { 1 }$ intersects A
$A S _ {1 }$ . If
There is a decrease in aggregate demand to AD
$A D _ { 2 }$ , then, according to mainstream economists, if
Prices are ?exible and wages are not, this will result in an equilibrium at point

• A) B.
• B) C.
• C) D.
• D) E.

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Definitions:

NATO

The North Atlantic Treaty Organization is a military alliance formed for mutual defense against aggression, primarily established in 1949.

Marshall Plan

An American initiative passed in 1948 to aid Western Europe, in which the U.S. gave over $12 billion for economic recovery post-World War II to counter the spread of communism.

Truman Doctrine

A United States policy, announced by President Truman in 1947, to provide military and economic assistance to countries threatened by communism.