Suppose the Economy Is Initially in Long-Run Equilibrium and Then

question 19

Multiple Choice

Suppose the economy is initially in long-run equilibrium and then it experiences a supply shock in the form of sharply higher energy prices. Which of the following is true?

• A) The short-run aggregate supply curve shifts leftward and the long-run supply curve shifts rightward.
• B) The short-run aggregate supply curve shifts rightward and there is a movement along the aggregate demand curve.
• C) The short-run aggregate supply curve does not shift and the long-run aggregate supply curve shifts rightward.
• D) The short-run aggregate supply curve shifts rightward but the long-run aggregate supply curve does not shift.
• E) The short-run aggregate supply curve shifts leftward and there is a movement along the aggregate demand curve.

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Definitions:

Indifference Curves

Graphical representations of combinations of two goods between which a consumer is indifferent.

Avocados

A fruit with a green, creamy texture and rich, nutty flavor, often used in culinary dishes and valued for its health benefits.

Grapefruits

A large, round citrus fruit with a rich, slightly bitter flavor, known for its health benefits and use in diets and cooking.

Indifference Curves

Curves representing combinations of two goods between which a consumer is indifferent, meaning any combination along the curve gives the same level of satisfaction.