Exhibit 17-2 Aggregate Demand and Aggregate Supply Curves

question 44

Multiple Choice

Exhibit 17-2 Aggregate demand and aggregate supply curves

As shown in Exhibit 17-2, if people behave according to adaptive expectations theory, an increase in the aggregate demand curve from AD₁ to AD₂ will cause:

• A) labor to adjust nominal wages immediately.
• B) the aggregate supply curve to shift from SRAS₁ to SRAS₂
• C) the price level to eventually fall from 110 to 100.
• D) real GDP to rise from $6 trillion to $6.5 trillion permanently.

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