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 at a real GDP level of Y₁. The economy will correct itself:

A) rapidly, without use of fiscal policy.
B) in the long run as wages fall.
C) in the short run as wages rise.
D) because the aggregate demand curve shifts.