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Figure 96 Alt Text for Figure 9

question 227

Multiple Choice

Figure 9.6 Alt text for Figure 9.6: In figure 9.6, a graph depicting short-run equilibrium and long-run equilibrium.
Long description for Figure 9.6: The x-axis is labelled, real GDP (trillions of 2007 dollars) , and the y-axis is labelled, price level (CPI) .5 lines are shown; SRAS1, SRAS2, AD1, AD2, and LRAS.Line SRAS1 begins near the bottom left and slopes up to the top right corner.Line SRAS2 follows the same slope as line SRAS1, but is plotted to the right.Line AD1 begins at the top left corner and slopes down to the bottom center.Line AD2 follows the same slope as AD1, but is plotted to the right.Line SRAS1 intersects line AD1 at point C, more than half way along both lines.Line SRAS1 intersects line AD2 at point B, approximately 3 quarters of the way along both lines.Line SRAS2 intersects line AD1 at point D, approximately 3 quarters of the way along both lines.Line SRAS2 intersects the line AD2 at point A, more than half way along both lines.Line LRAS is perpendicular to the x-axis, passing through points A and C and intersecting all 4 lines.
-Refer to Figure 9.6.Suppose the economy is at point A.If government spending increases in the economy, where will the eventual long-run equilibrium be?

Definitions:

Insurance Scheme

A system or plan that provides financial protection against certain risks, such as illnesses or accidents, typically through the collection of premiums.

Adverse Selection

A situation in which one party in a transaction has more or better information than the other, often leading to imbalances and inefficiencies in markets, especially insurance.

Insurance Company

A business that provides coverage, in the form of compensation following a loss, in exchange for premium payments.

Commodities

Basic goods used in commerce that are interchangeable with other goods of the same type.