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-Assume That the Economy Depicted in Panel (A)of Exhibit 20A-1

Question 25

Multiple Choice

-Assume that the economy depicted in Panel (a) of Exhibit 20A-1 is in short-run equilibrium where AD equals SRAS₁.If the economy is left to correct itself according to classical theory: A) wages will fall as long as real GDP is above Yp. B) lower wages will result in a shift from SRAS₁ to SRAS₂. C) long-run equilibrium will be established at Yp and P₃. D) all of the above will take place.
-Assume that the economy depicted in Panel (a) of Exhibit 20A-1 is in short-run equilibrium where AD equals SRAS₁.If the economy is left to correct itself according to classical theory:


A) wages will fall as long as real GDP is above Yp.
B) lower wages will result in a shift from SRAS₁ to SRAS₂.
C) long-run equilibrium will be established at Yp and P₃.
D) all of the above will take place.

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