Price Level LAS SAS, SAS, AD, SAS, AD₁ AD, Real Output Refer to the graph. Suppose the economy is at SAS2 and AD3. What is a possible way the economy can return to potential output? What dynamic price level feedback effect could prevent the return to potential output? How would the dynamic price level feedback effect show up in the graph? O A decrease in wages in the economy; a decrease in wages would further decrease AD; a shift in AD3 to the left A decrease in material costs in the economy; a decrease in material costs would decrease AD; a shift in AD3 to the right A decrease in wages in the economy; a decrease in wages would further decrease AD; a shift in AD from AD2 to AD1 A decrease in asset prices in the economy; a decrease in asset prices would further decrease AD; a shift in AD from AD2 to AD3
Price Level LAS SAS, SAS, AD, SAS, AD₁ AD, Real Output Refer to the graph. Suppose the economy is at SAS2 and AD3. What is a possible way the economy can return to potential output? What dynamic price level feedback effect could prevent the return to potential output? How would the dynamic price level feedback effect show up in the graph? O A decrease in wages in the economy; a decrease in wages would further decrease AD; a shift in AD3 to the left A decrease in material costs in the economy; a decrease in material costs would decrease AD; a shift in AD3 to the right A decrease in wages in the economy; a decrease in wages would further decrease AD; a shift in AD from AD2 to AD1 A decrease in asset prices in the economy; a decrease in asset prices would further decrease AD; a shift in AD from AD2 to AD3
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![Price Level
LAS
SAS,
SAS,
AD,
SAS,
AD₁
AD,
Real Output
Refer to the graph. Suppose the economy is at SAS2 and AD3. What is a possible way the
economy can return to potential output? What dynamic price level feedback effect could
prevent the return to potential output? How would the dynamic price level feedback effect show
up in the graph?
O A decrease in wages in the economy; a decrease in wages would further decrease
AD; a shift in AD3 to the left
A decrease in material costs in the economy; a decrease in material costs would
decrease AD; a shift in AD3 to the right
A decrease in wages in the economy; a decrease in wages would further decrease
AD; a shift in AD from AD2 to AD1
A decrease in asset prices in the economy; a decrease in asset prices would
further decrease AD; a shift in AD from AD2 to AD3](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa03d0f55-f513-492a-b119-f166df3a80cf%2F655716f9-1c44-47d5-9ca0-9937a498a9a8%2F41ybrat_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Price Level
LAS
SAS,
SAS,
AD,
SAS,
AD₁
AD,
Real Output
Refer to the graph. Suppose the economy is at SAS2 and AD3. What is a possible way the
economy can return to potential output? What dynamic price level feedback effect could
prevent the return to potential output? How would the dynamic price level feedback effect show
up in the graph?
O A decrease in wages in the economy; a decrease in wages would further decrease
AD; a shift in AD3 to the left
A decrease in material costs in the economy; a decrease in material costs would
decrease AD; a shift in AD3 to the right
A decrease in wages in the economy; a decrease in wages would further decrease
AD; a shift in AD from AD2 to AD1
A decrease in asset prices in the economy; a decrease in asset prices would
further decrease AD; a shift in AD from AD2 to AD3
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