Exhibit 20A-2 Macro AD/AS Models

question 8

Multiple Choice

Exhibit 20A-2 Macro AD/AS Models

-In Panel (b) of Exhibit 20A-2,the economy is initially in short-run equilibrium at real GDP level Y₁ and price level P₂.Classical theory argues that:

• A) SRAS will shift to leftward and establish full employment at P₃Yp without government intervention.
• B) higher wages will result in a leftward shift of SRAS.
• C) long-run equilibrium will be established at Yp and P₃.
• D) all of the above will take place.

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Definitions:

Positive Responses

Reactions or feedback that are affirmative, favorable, or supportive in nature, indicating agreement, pleasure, or endorsement.

Respondent Behavior

Behavior that occurs as an automatic response to a specific stimulus, often used in the context of classical conditioning.

Operant Behavior

Behavior that is controlled by its consequences, including rewards and punishments.

Pavlov

A Russian physiologist best known for his discovery of classical conditioning through his experiments with animals.