Based on the Given Figure, the Economy Is Initially in Long-Run

question 141

Multiple Choice

Based on the given figure, the economy is initially in long-run equilibrium at point A. If there is a favorable supply shock that increases potential output and shifts the long-run aggregate supply curve from LRAS to LRAS', then there is initially ________ gap and the short-run aggregate supply curve will ________.

• A)an expansionary; eventually shift to SRAS'
• B)an expansionary; eventually shift to SRAS"
• C)a recessionary; eventually shift to SRAS"
• D)a recessionary; eventually shift to SRAS'

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Definitions:

Pressure

The force applied perpendicular to the surface of an object per unit area over which that force is distributed, often measured in units such as Pascal or psi.

Cognitive Dissonance

The psychological discomfort experienced when holding two or more conflicting cognitions, beliefs, or values simultaneously.

Internal Frustration

A psychological state that arises from internal conflict or unmet needs, leading to emotional distress and sometimes aggressive behavior.

Catastrophes

Large-scale disasters, mishaps, or failures that cause significant harm, damage, or loss of life.