Refer to the figure. Suppose the economy is in short-run equilibrium above potential GDP and wages and prices are rising. If contractionary policy is used to move the economy back to long-run equilibrium, this would be depicted as a movement from using the basic AD-AS model in the figure. A. D to C B. C to B C. B to A D. A to E Price level LRAS B D m Real GDP C AD₁ SRAS AD₁ AD2

Refer to the figure. Suppose the economy is in short-run equilibrium above potential GDP and wages and prices are rising. If contractionary policy is used to move the economy back to long-run equilibrium, this would be depicted as a movement from using the basic AD-AS model in the figure. A. D to C B. C to B C. B to A D. A to E Price level LRAS B D m Real GDP C AD₁ SRAS AD₁ AD2

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

Problem 2TY

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