Refer to Figure 11

question 90

Multiple Choice

Refer to Figure 11.1.Assume aggregate demand is initially represented by AD₁ and full-employment output is $6.0 trillion.If aggregate demand increases by the amount of the GDP gap,equilibrium will occur at

• A)Point a.
• B)Point b.
• C)Point c.
• D)Point D.If aggregate demand increased by the amount of the recessionary GDP gap,we would get a shift from AD₁ to AD_2. The new equilibrium would occur at point c,leaving the economy short of full employment (Q_F).Some of the increased demand pushes up prices instead of output.

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