​ ​ Exhibit 16A-2 Macro AD/AS Models

Multiple Choice

​ ​ Exhibit 16A-2 Macro AD/AS Models
​

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

A) SRAS will shift to leftward and establish full employment at P ₃ Y _p without government intervention.
B) higher wages will result in a rightward shift of SRAS.
C) long-run equilibrium will be established at Y _p and P ₁ .
D) lower wages will result in a leftward shift of SRAS.