The Figure Below Shows Short-Run Equilibrium in an Aggregate Demand-Aggregate

question 13

Multiple Choice

The figure below shows short-run equilibrium in an aggregate demand-aggregate supply model.If the economy is currently producing Y₁ level of output,long-run equilibrium will be established if:​ ​
Figure 10.5

• A)the short-run aggregate supply curve shifts to the right to remove the expansionary gap.
• B)the short-run aggregate supply curve shifts to the left to remove the expansionary gap.
• C)the short-run aggregate supply curve shifts to the left to remove the recessionary gap.
• D)the short-run aggregate supply curve shifts to the right to remove the recessionary gap.
• E)there is a leftward shift of the aggregate demand curve.

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Definitions:

Bus Fares

The charges levied for traveling on a bus, typically based on the distance or zones traveled.

Revenues Dropped

A situation in which the total income generated by a business from its activities decreases compared to a previous period.

Price Elasticity of Demand

A study of how price developments influence the demand proportions for a commodity.

Income Elasticity of Demand

An indicator of the variation in demand for a product or service resulting from alterations in buyers' income levels.