Figure 16-3 -Refer to Figure 16-3. Where Does an Increase in Aggregate

question 147

Multiple Choice

Figure 16-3
-Refer to Figure 16-3. Where does an increase in aggregate demand move the economy from c and 3 to, in the short run and the long run?

• A)a and 1 in the short run, b and 2 in the long run
• B)b and 2 in the short run, a and 1 in the long run
• C)d and 4 in the short run, e and 5 in the long run
• D)d and 2 in the short run, a and 5 in the long run

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Definitions:

Surplus

An economic situation where the quantity of goods supplied is greater than the quantity demanded.

Shortage

A situation in an economy where the demand for a product or service exceeds the supply available at a specific price.

Equilibrium Price

The financial value where the availability of goods equals consumer demand.

Demand Falls

Demand falls occur when there is a decrease in the quantity of a good or service demanded at any given price, often due to changes in consumer preferences, income, or price increases.