Figure 33-6

Refer to Figure 33-6. Suppose the economy starts at A. If changes occur that move the economy to a new short-run equilibrium of P1 and Y1 , then it must be the case that

Question

Figure 33-6

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Refer to Figure 33-6. Suppose the economy starts at A. If changes occur that move the economy to a new short-run equilibrium of P1 and Y1 , then it must be the case that

BlackTom AI · Accepted Answer

The question refers to Figure 33-6 and asks what must be true if the economy moves from the initial point A to a new short-run equilibrium at P1 and Y1.

Option 1: short-run aggregate supply has increased. If SRAS shifted right (increased), the price level would typically fall and output would rise, moving the economy to a higher Y with a lower P, not to a lower Y1 at P1. This would not place the economy at the depicted Y1, P1 combination, so this is unlikely to be the cause of moving from A to the P1–Y1 point.

Option 2: short-run aggregate supply has decreased. A leftward SRAS shift would raise the price level and reduce output in the short run. That would push the economy to a higher price and lower output, which could align with a move to a lower Y, but the diagram’s labeled AD shifts show the movement is associated with a change along the demand side rather than a supply constraint. Additionally, a decrease in SRAS typically results in higher prices, not the specific P1 level shown; thus this is not the best explanation for the move to P1, Y1.

Option 3: aggregate demand has decreased. A downward shift in aggregate demand would reduce both the price level and output in the short run, moving the economy from a higher-output, higher-price point to a lower-output, lower-price point, which matches moving to P1 and Y1 on the diagram. The AD curve shifts left (AD1 → AD2 → AD3), consistent with the observed movement to a lower equilibrium.

Option 4: aggregate demand has increased. An increase in AD would raise the price level and typically increase output in the short run, moving the economy along SRAS to a higher P and higher Y, not to the lower P1, Y1 combination shown. This contradicts the observed direction of movement to P1 and Y1.

In sum, the most consistent explanation with a shift to a lower price level and lower output on the diagram is a decrease in aggregate demand. The other options either imply opposite price/output movements or attribute the shift to the wrong side of the AS/AD framework, leading to inconsistent outcomes with the P1–Y1 point.

Figure 33-6 Refer to Figure 33-6. Suppose the economy starts at A. If changes occur that move the economy to a new short-run equilibrium of P1 and Y1 , then it must be the case that

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Figure 33-6 ​ Refer to Figure 33-6. Suppose the economy starts at A. If changes occur that move the economy to a new short-run equilibrium of P1 and Y1 , then it must be the case that