-In the Above Figure, If We Start at AD₁ and SRAS₁

question 170

Multiple Choice

-In the above figure, if we start at AD₁ and SRAS₁, and the money supply increases unexpectedly, what causes the economy to get to the long-run equilibrium?

• A)People's expectations will revise after a short-run gain in output, wages will fall, and SRAS will shift leftward.
• B)People's expectations will revise after a short-run gain in output, wages will rise, and SRAS will shift rightward.
• C)People's expectations will revise after a short-run loss in output, wages will fall, and SRAS will shift leftward.
• D)People's expectations will revise after a short-run gain in output, wages will rise, and SRAS will shift leftward.

---

Definitions:

Ecologically Valid Tests

Assessments designed to measure skills and abilities in settings and under conditions that are realistic and representative of actual practice.

Cognitive Ability

The capacity to perform various mental activities related to learning, problem-solving, decision making, and reasoning.

Control Processes

Psychological mechanisms that regulate thoughts, emotions, and actions, ensuring that behaviors are congruent with goals or norms.

Prefrontal Cortex

The frontmost region of the frontal lobes in the brain, associated with decision making, social behavior, personality, and cognitive planning.