Figure 15-4
-In Figure 15-4,if C is the initial equilibrium point and there is an unanticipated decrease in aggregate demand from A D₂ to A D₁,then
A)the new short run equilibrium will be at point B.
B)the new long run equilibrium will be at point B.
C)the new short run equilibrium will be at point D.
D)real GDP per year will fall below Q₁.

Question

Figure 15-4 
-In Figure 15-4,if C is the initial equilibrium point and there is an unanticipated decrease in aggregate demand from A D₂ to A D₁,then
A)the new short run equilibrium will be at point B. 
B)the new long run equilibrium will be at point B. 
C)the new short run equilibrium will be at point D. 
D)real GDP per year will fall below Q₁.

Quizplus · Accepted Answer

With a decrease in aggregate demand, the new equilibrium point will move leftward to a point where the AD₁ curve intersects the SRAS curve. This new equilibrium point will be at point D in the short run. In the long run, wages and prices will adjust downward, causing the SRAS curve to shift downward, and the economy will return to full employment at a new equilibrium point, which could be to the left or right of the initial equilibrium point depending on the extent of the decrease in AD.

Figure 15-4 -In Figure 15-4,if C Is the Initial Equilibrium Point and Equilibrium