In the Graphs Below, Q_P Refers to the Economy's Potential

question 87

Multiple Choice

In the graphs below, Q_P refers to the economy's potential output level. Refer to the graphs above. In Graph B, assume that the economy is initially in equilibrium at point x₁ but then there is an increase in the price level from P₁ to P₂. In the long run, this change will lead to:

• A) Lower nominal wages and a shift in the short-run aggregate supply curve from AS₁ to AS₂
• B) Higher nominal wages and a shift in the short-run aggregate supply curve from AS₁ to AS₂
• C) Lower nominal wages and a movement from equilibrium point x₁ to equilibrium point x₂
• D) Higher nominal wages and a movement from equilibrium point x₁ to equilibrium point x₂

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Definitions:

Rationalization

A psychological strategy where questionable actions or emotions are rationalized in an apparently logical way, sidestepping the real reasons behind them.

Involuntarily Committed

A legal process through which individuals are placed into a psychiatric treatment facility against their will due to concerns about their risk to themselves or others.

Schizophrenia

A chronic mental health condition marked by disturbances in thought, perception, emotions, and behavior.

Family Burden

The stress, difficulties, and challenges families experience due to the mental or physical illness of a family member.