Multiple Choice
Within the AD/AS model, which one of the following adjustments will cause the economy to return to its long-run capacity when output is temporarily greater than the economy's long-run potential?
A) Lower wage rates and resource prices reduce short-run aggregate supply.
B) Lower interest rates increase aggregate demand and, thereby, stimulate output.
C) Higher wage rates and resource prices reduce short-run aggregate supply.
D) A decrease in prices reduces aggregate demand.
Correct Answer:
Verified
Correct Answer:
Verified
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