Refer to Exhibit 14-2

Multiple Choice

Refer to Exhibit 14-2.The economy moves from point 1 to 2 to 3 to 4 to 5 to 6 to 7.What explains this?

A) an initial decrease in SRAS,followed by alternating rises in AD and decreases in SRAS
B) continued increases in AD
C) continued decreases in SRAS
D) an initial rise in the price level,followed by a decrease in SRAS,and then alternating increases in AD and decreases in SRAS
E) continued increases in SRAS