Exhibit 17-3 Aggregate Demand and Aggregate Supply Curves

Multiple Choice

Exhibit 17-3 Aggregate demand and aggregate supply curves

As shown in Exhibit 17-3, if people behave according to adaptive expectations theory, an increase in the aggregate demand curve from AD₁ to AD₂ will cause the economy to move:

A) from E₁ to E₂ initially and then eventually move back to E₁.
B) directly from E₁ to E₂ and then remain at E₂.
C) directly from E₁ to E₃ and then remain at E₃.
D) from E₁ to E₂ initially and then eventually move to E₃.