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-Refer to the Above Diagram

Question 110

Multiple Choice

-Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P<sub>2</sub> and that the economy initially is operating at its full-employment level of output Q <sub>f</sub>.In the short run,an increase in the price level from P<sub>2</sub> to P<sub>3</sub> will: A) change aggregate supply from AS<sub>2</sub> to AS<sub>3</sub>. B) increase real output from Q<sub>1</sub> to Q<sub>2</sub>. C) change aggregate supply from AS<sub>2</sub> to AS<sub>1</sub>. D) increase real output from Q<sub>f</sub> to Q<sub>2</sub>.
-Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P2 and that the economy initially is operating at its full-employment level of output Q f.In the short run,an increase in the price level from P2 to P3 will:


A) change aggregate supply from AS2 to AS3.
B) increase real output from Q1 to Q2.
C) change aggregate supply from AS2 to AS1.
D) increase real output from Qf to Q2.

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