Exhibit 14A-5 Macro AD-AS Model

-Given the shift of the aggregate demand curve from AD₁ to AD₂ in Exhibit 14A-5,the real GDP and price level (CPI)in long-run equilibrium will be:
A) P₂, Y₁.
B) P₃, Yp.
C) P₂,Yp.
D) P₁, Yp.

Question

Exhibit 14A-5 Macro AD-AS Model
 
-Given the shift of the aggregate demand curve from AD₁ to AD₂ in Exhibit 14A-5,the real GDP and price level (CPI)in long-run equilibrium will be:
A) P₂, Y₁. 
B) P₃, Yp. 
C) P₂,Yp. 
D) P₁, Yp.

Quizplus · Accepted Answer

In the long-run equilibrium, the economy will adjust to the potential output level (Yp) and the price level will be at P₃, reflecting the new aggregate demand conditions.