FIGURE 23-1 Refer to Figure 23-1

Multiple Choice

FIGURE 23-1 Refer to Figure 23-1.Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point V.The price level is P₀.Now,suppose there is an exogenous rise in the price level to .Which of the following statements describes the likely macroeconomic effects?

A) The AE curve shifts to AE¹,a new equilibrium is established at point U,and the AD curve shifts from AD⁰ to AD¹,and equilibrium from point B to point D.
B) The AE curve shifts to AE²,a new equilibrium is established at point W,and the economy moves from point B to point C along AD⁰.
C) The AE curve shifts to AE¹,a new equilibrium is established at point U,and the economy moves from point B to point A along AD⁰.
D) The AE curve shifts to AE²,a new equilibrium is established at point W,and the AD curve shifts from AD⁰ to AD¹,and equilibrium moves from point B to point D.