Exhibit 17-3 Aggregate Demand and Aggregate Supply Curves

question 2

Multiple Choice

Exhibit 17-3 Aggregate demand and aggregate supply curves

As shown in Exhibit 17-3, if people behave according to adaptive expectations theory, an increase in the aggregate demand curve from AD₁ to AD₂ will cause the economy to move:

• A) from E₁ to E₂ initially and then eventually move back to E₁.
• B) directly from E₁ to E₂ and then remain at E₂.
• C) directly from E₁ to E₃ and then remain at E₃.
• D) from E₁ to E₂ initially and then eventually move to E₃.

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