In Panel (A)of Exhibit 16-2, the Economy Is Initially in Short-Run

Multiple Choice

In Panel (a) of Exhibit 16-2, the economy is initially in short-run equilibrium at real GDP level Y₁ and price level P₂. Classical theory argues that:

A) SRAS₁ will shift to SRAS₂ without government intervention.
B) lower wages will result in a shift from SRAS₁ to SRAS₂.
C) long-run equilibrium will be established at Y_p and P₃.
D) all of the above will take place.