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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Commercial Activity

Any type of business or activity that involves the buying and selling of goods or services.

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