For the following questions,use the diagram below: Figure 34-6. -Refer to Figure 34-6.Which of the following is correct? A) A wave of optimism could move the economy from point a to point B) If aggregate demand moves from AD₁ to AD₂,the economy will stay at point b in both the short run and long run. C) It is possible that either fiscal or monetary policy might have caused the shift from AD₁ to AD₂. D) All of the above are correct.

Question

Quizplus · Accepted Answer

The diagram shows the short-run and long-run effects of a shift in aggregate demand from AD₁ to AD₂. It is possible that either fiscal or monetary policy caused the shift, so option C is correct. Option A is incorrect because a wave of optimism is not shown in the diagram. Option B is incorrect because the economy will move from point b in the short run to point c in the long run.

For the Following Questions,use the Diagram Below