Figure 17-1 -Refer to Figure 17-1. During the Great Depression, Aggregate Demand

Multiple Choice

Figure 17-1
-Refer to Figure 17-1. During the Great Depression, aggregate demand declined sharply, thrusting the economy into a recessionary gap. Nominal wages plunged roughly 20% between 1929 and 1933. How did the economy respond to the falling wages?

A) The short-run aggregate supply curve shifted left, from SRAS₂ to SRAS₁, resulting in a short run equilibrium at point k.
B) The short-run aggregate supply curve shifted right, from SRAS₁ to SRAS₂, resulting in a short run equilibrium at point n.
C) The short-run aggregate supply curve shifted right, from SRAS₁ to SRAS₂, resulting in a short run equilibrium at point j.
D) The short-run aggregate supply curve shifted left, from SRAS₂ to SRAS₁, resulting in a short run equilibrium at point m.