m I Topics 810 Use the following graph to answer the next qu

m I (Topics 8-10) Use the following graph to answer the next question. 4 AS2 AS, AS, 0154 55 AD eBook a,a, , Real Domestic Output When output Increases from Qn and the price level decreases from Pi, this change will Multiple Choice be caused by a shift in the aggregate supply curve from ASt to AS2 be caused by a shift in the aggregate supply curve from ASi to AS3. result in a movement along the aggregate demand curve from e to e2 result in a movement along the aggregate demand curve from es to e Prev O Type here to search O e

Solution

Price level will decrease from P1 to P3 and quantity will increase from Q1 to Q3 only when equilibrium shifts from e1 to e3. Equilibrium occurs when As intersects AD. TO shift equilibrium from e1 to e3, Aggregate supply curve must shift from AS to AS3.

(b) is correct.