Exhibit 17-3 Aggregate Demand and Aggregate Supply Curves

question 13

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 price level to move:

• A) from 100 to 110 initially and then eventually move back to 100.
• B) directly from 100 to 110 and then remain at 110.
• C) directly from 100 to 120 and then remain at 120.
• D) from 100 to 110 initially and then eventually move to 120.

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