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 price level to move:

A) from 100 to 110 initially and then eventually move back to 100.
B) directly from 100 to 110 and then remain at 110.
C) directly from 100 to 120 and then remain at 120.
D) from 100 to 110 initially and then eventually move to 120.