-Refer to Figure 5

Multiple Choice

-Refer to Figure 5.4. If the price level rises above P₁ because of an increase in aggregate demand, the:

A) economy will move up along curve B and output will temporarily increase.
B) the potential output line C will shift upward.
C) aggregate supply curve B will automatically shift to the right.
D) economy's output first will decline, then increase, and finally return to Y.