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Exhibit 17-2 Aggregate Demand and Aggregate Supply Curves

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Exhibit 17-2 Aggregate demand and aggregate supply curves
Exhibit 17-2 Aggregate demand and aggregate supply curves   As shown in Exhibit 17-2, if people behave according to rational expectations theory, an increase in the aggregate demand curve from AD<sub>1</sub> to AD<sub>2</sub> will cause: A)  labor to adjust nominal wages sluggishly. B)  the aggregate supply curve to remain at SRAS<sub>1</sub>. C)  the price level to eventually rise from 100 to 110. D)  the price level to rise directly from 100 to 110 and GDP to remain constant at $6 trillion.
As shown in Exhibit 17-2, if people behave according to rational expectations theory, an increase in the aggregate demand curve from AD1 to AD2 will cause:


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