Refer to the information provided in Figure 26.8 below to answer the question(s) that follow. Figure 26.8 -Refer to Figure 26.8. This economy cannot continue to produce Y₁ (or at point B because A) the price of raw material and wages will increase shifting the aggregate supply curve to AS₁. B) the price of inputs will decrease, shifting the aggregate supply curve to AS₂. C) the price of raw material will increase, shifting the aggregate demand curve to AD₂. D) all of the above.

Question

Quizplus · Accepted Answer

Point B is on the vertical portion of the aggregate supply curve, indicating that the economy has reached its maximum potential output. Any increase in the price of raw material or wages will result in increased costs for firms, shifting the aggregate supply curve to the left and reducing output. Therefore, A is the best choice as it correctly identifies the reason why the economy cannot continue to produce at point B. B is incorrect as a decrease in input prices would shift the aggregate supply curve to the right, allowing for increased output. C is incorrect as an increase in the price of raw materials would shift the aggregate supply curve to the left, reducing output.

Refer to the Information Provided in Figure 26