Figure 33-8. -Refer to Figure 33-8.Suppose the economy starts at Z.If changes occur that move the economy to a new short run equilibrium of P₃ and Y₃ ,then it must be the case that A)short run aggregate supply has decreased. B)short run aggregate supply has increased. C)aggregate demand has increased. D)aggregate demand has decreased.

Question

Quizplus · Accepted Answer

In the new short run equilibrium, the level of output (Y) has increased, while the price level (P) has remained the same as in the initial equilibrium. This indicates that there has been an increase in aggregate demand. However, given that the price level has not changed, it is unlikely that there was a shift in the long run aggregate supply curve. Therefore, the most likely explanation is that there has been an increase in short run aggregate supply, allowing firms to produce more output at the same price level.

Figure 33-8. -Refer to Figure 33-8.Suppose the Economy Starts at Z.If Changes