Exhibit 20A-2  Macro AD/AS Models in Panel (B) of Exhibit

Multiple Choice

Exhibit 20A-2  Macro AD/AS Models In Panel (b) of Exhibit 20A-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 P₃Y_p without government intervention.
B) higher wages will result in a leftward shift of SRAS.
C) long-run equilibrium will be established at Y_p and P₃.
D) all of the above will take place.