Exhibit 20A-1  Policy Alternatives Assume That the Economy Depicted in Panel

question 162

Multiple Choice

Exhibit 20A-1  Policy Alternatives Assume that the economy depicted in Panel (a) of Exhibit 20A-1 is in short-run equilibrium where AD equals SRAS₁. If the economy is left to correct itself according to classical theory:

• A) wages will fall as long as real GDP is above Y_p.
• B) lower wages will result in a shift from SRAS₁ to SRAS₂.
• C) long-run equilibrium will be established at Y_p and P₃.
• D) all of the above will take place.

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Definitions:

Internal Variables

Factors within a system or organism that influence its functioning or behavior.

Socioeconomic Factors

Aspects of society and economy that influence individuals' health, well-being, and quality of life, including income, education, and employment status.

Cultural Background

The cultural heritage, traditions, practices, and beliefs that contribute to an individual's identity and worldview.

Maintenance

The process of preserving something in a desired condition by performing regular checks and repairs.