Refer to the graph. Assume that the economy is in initial equilibrium where AD $A D _ { 1 }$ intersects A
$A S _ { 1 }.$ . If
There is an anticipated decrease in aggregate demand to AD
$A D _ { 2 }$ , then, according to rational
Expectations theory, the path for adjustment runs from point
A) A to B to C.
B) A to D to C.
C) A directly to C.
D) A directly to D.

Question

Refer to the graph. Assume that the economy is in initial equilibrium where AD $A D _ { 1 }$ intersects A
$A S _ { 1 }.$ . If
There is an anticipated decrease in aggregate demand to AD
$A D _ { 2 }$ , then, according to rational
Expectations theory, the path for adjustment runs from point
A) A to B to C. 
B) A to D to C. 
C) A directly to C. 
D) A directly to D.

Quizplus · Accepted Answer

The Answer of  Refer to the graph. Assume that the economy is in initial equilibrium where AD $A D _ { 1 }$ intersects A
$A S _ { 1 }.$ . If
There is an anticipated decrease in aggregate demand to AD
$A D _ { 2 }$ , then, according to rational
Expectations theory, the path for adjustment runs from point
A) A to B to C. 
B) A to D to C. 
C) A directly to C. 
D) A directly to D.

Refer to the Graph AD1A D _ { 1 }AD1​ Intersects A

Refer to the Graph $A D _ { 1 }$ Intersects A