Use the Following to Answer Questions

Multiple Choice

Use the following to answer questions:
Figure: Policy Alternatives
-(Figure: Policy Alternatives) Refer to Figure: Policy Alternatives. Assume that the economy depicted in panel (a) is in short-run equilibrium with AD₁ and SRAS₁. If the economy is left to correct itself:

A) real interest rates will fall, which will shift SRAS rightward.
B) lower wages will result in a gradual shift from SRAS₁ to SRAS₂.
C) long-run equilibrium will be established at Y_P and P₃.
D) the aggregate demand curve will shift leftward.