Refer to the Graph Above

question 30

Multiple Choice

Refer to the graph above. Assume that the economy is in initial equilibrium where AD₁ intersects AS₁. If there is an unanticipated increase in aggregate demand and the economy self-corrects, then the adaptive-expectations adjustment path would go from point:

• A) A directly to B
• B) A to B to C
• C) B to A to D
• D) A to B to C to D

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Definitions:

Nonreactive

A term used to describe a situation, measurement, or test that does not alter the behavior or response of the subject being observed.

Timid

Showing a lack of courage or confidence; easily frightened.

Prejudice

Preconceived opinion that is not based on reason or actual experience; bias or discrimination against an individual or group.

Discrimination

Unjust or prejudicial treatment of different categories of people, especially on the grounds of race, age, or sex.