Figure 15-4 -In Figure 15-4,if Initial Equilibrium Is at Point a and Point

question 70

Multiple Choice

Figure 15-4
-In Figure 15-4,if initial equilibrium is at point A and if there is an unanticipated increase in aggregate demand from A D₁ to A D₂,then

• A)in the short run real output will remain at Q₁.
• B)in the short run real output will increase above Q₁,but in the long run it will return to Q₁.
• C)in the long run real output will increase above Q₁.
• D)real output will increase above Q₁ in both the short run and in the long run.

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Definitions:

Short Run

A period during which at least one factor of production is fixed, limiting the ability to adjust to changing market conditions.

Production

The process of creating goods or services using labor, machinery, and raw materials.

Price Taker

A market participant that accepts prevailing market prices as given, without having the power to influence these prices.

Competitive Market

A market structure characterized by many buyers and sellers, free entry and exit, and products that are similar, ensuring no single entity can control prices.