When the Demand Curve Shifts to the Right and the Supply

question 146

Multiple Choice

When the demand curve shifts to the right and the supply curve is held constant,

• A) the equilibrium price and quantity decrease.
• B) the equilibrium price increases and the equilibrium quantity decreases.
• C) the equilibrium price decreases and the equilibrium quantity increases.
• D) the equilibrium price and quantity increase.
• E) one can see a movement along the demand curve.

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Definitions:

Expansionary Gap

A situation where the actual output of an economy exceeds the potential output, often leading to increased inflation.

Self-correction

The process by which market mechanisms adjust to eliminate economic imbalances, leading to the restoration of equilibrium without external intervention.

Real Wages

Wages adjusted for inflation, reflecting the true purchasing power of income earned from labor.

Expansionary Gap

An economic situation characterized by output exceeding the economy's long-term sustainable levels, often leading to inflationary pressure due to high demand.