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Exhibit 17-2 Aggregate Demand and Aggregate Supply Curves

Question 44

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Exhibit 17-2 Aggregate demand and aggregate supply curves
Exhibit 17-2 Aggregate demand and aggregate supply curves As shown in Exhibit 17-2, if people behave according to adaptive expectations theory, an increase in the aggregate demand curve from AD<sub>1</sub> to AD<sub>2</sub> will cause: A) labor to adjust nominal wages immediately. B) the aggregate supply curve to shift from SRAS<sub>1</sub> to SRAS<sub>2</sub> C) the price level to eventually fall from 110 to 100. D) real GDP to rise from $6 trillion to $6.5 trillion permanently.
As shown in Exhibit 17-2, if people behave according to adaptive expectations theory, an increase in the aggregate demand curve from AD1 to AD2 will cause:


A) labor to adjust nominal wages immediately.
B) the aggregate supply curve to shift from SRAS1 to SRAS2
C) the price level to eventually fall from 110 to 100.
D) real GDP to rise from $6 trillion to $6.5 trillion permanently.

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