-Refer to Exhibit 16-6

Multiple Choice

-Refer to Exhibit 16-6.The economy is initially in long-run equilibrium at point A.There is a correctly anticipated increase in aggregate demand,prices and wages are flexible,the economy is self-regulating,and people hold rational expectations.The economy will move to point

A) F.
B) C.
C) B.
D) B or C.
E) This exhibit does not show the point the economy would move to.