The economy of Ashenvale is currently in a long-run equilibrium, depicted by point E, on the graph. Suppose that there is an AD shock to the economy and the AD curve shifts right, as shown by the AD, curve on the graph. Which of the following factors would be the most likely cause of the shock? OA. an increase in the factor prices OB. an increase in interest rates OC. a decrease in imports OD. an appreciation of the dollar OE. an increase in technology Price Level (P) 2.400 2,000 1,600- 1,200- 800- 400- 0- 2,000 Economy of Ashenvale V 4,000 Y* ASO Eo E₁ AD₁ 6.000 Real GDP (Y) 8,000 ADO 10,000 Q Q
The economy of Ashenvale is currently in a long-run equilibrium, depicted by point E, on the graph. Suppose that there is an AD shock to the economy and the AD curve shifts right, as shown by the AD, curve on the graph. Which of the following factors would be the most likely cause of the shock? OA. an increase in the factor prices OB. an increase in interest rates OC. a decrease in imports OD. an appreciation of the dollar OE. an increase in technology Price Level (P) 2.400 2,000 1,600- 1,200- 800- 400- 0- 2,000 Economy of Ashenvale V 4,000 Y* ASO Eo E₁ AD₁ 6.000 Real GDP (Y) 8,000 ADO 10,000 Q Q
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The economy of Ashenvale is currently in a long-run equilibrium, depicted by point E, on the graph.
Suppose that there is an AD shock to the economy and the AD curve shifts right, as shown by the AD, curve on the
graph.
Which of the following factors would be the most likely cause of the shock?
A. an increase in the factor prices
OB. an increase in interest rates
C. a decrease in imports
OD. an appreciation of the dollar
OE. an increase in technology
Price Level (P)
2,400-
2,000
1.600-
1.200-
800-
400-
2.000
Economy of Ashenvale
4.000
Eo
6.000
Real GDP (Y)
ASO
E₁
8.000
AD₁
ADO
10.000
G
Transcribed Image Text:Refer to the diagram that shows an AD/AS model for a hypothetical economy.
Suppose the economy is in a short-run equilibrium at Y₁. An appropriate fiscal policy for attaining potential output
(Y*) is a(n)
O A. decrease in current imports.
OB. increase in exports.
OC. decrease in current consumption.
OD. increase in personal and corporate taxes.
Price Level
P₁
Po
A
1
Real GDP
AS
AD
Q
G
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