-The figure above shows the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves for the U.S. economy. The economy is currently at point A. A demand-pull rise in the price level will initially move the economy to point ________ and to point ________.
A) E when aggregate demand increases; D when the wage rate rises
B) B when aggregate demand decreases; C when the wage rate rises
C) E when aggregate demand increases; A when the wage rate rises
D) C when the wage rate rises; D when aggregate demand increases

Question

-The figure above shows the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves for the U.S. economy. The economy is currently at point A. A demand-pull rise in the price level will initially move the economy to point ________ and to point ________.
A) E when aggregate demand increases; D when the wage rate rises 
B) B when aggregate demand decreases; C when the wage rate rises 
C) E when aggregate demand increases; A when the wage rate rises 
D) C when the wage rate rises; D when aggregate demand increases

Quizplus · Accepted Answer

A demand-pull increase in the price level, caused by an increase in aggregate demand, initially moves the economy to point E. Over time, as the wage rate rises in response to the higher demand for labor, the short-run aggregate supply curve shifts leftward, moving the economy to point D, where it returns to the long-run aggregate supply curve.

-The Figure Above Shows the Aggregate Demand, Short-Run Aggregate Supply