Use the AD-AS model in the figure below to answer the following questions.Price levelLRASAS*AD,AD₂AD₁Real GDPSuppose this economy is operating at point B, if there is an increase in the price of inputs, then in the shortand in the long run. . . .runa) real GDP falls and the price level rises; real GDP is below its original level with a higher pricelevelb) real GDP rises and the price level falls; real GDP and the price level return to their original levelsc) real GDP and the price level both rise; real GDP is above its original level with a higher price leveld) real GDP falls and the price level rises; real GDP is at its original level as a result of the factorprice adjustment processe) real GDP and the price level both rise; real GDP returns to its original level with a higher pricelevel

The AD-AS model represents the relationship between aggregate demand (AD) and aggregate supply (AS)…

Answered: Use the AD-AS model in the figure below…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 59CTQ: Review the problem in the Work It Out titled Interpreting the AD/AS Model. Like the information...

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