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Assume the economy is self-regulating and currently is in long-run equilibrium with the price level equal to P5. If something happens that shifts the AD curve to the AD1position, the economy will eventually settle down at a long-run equilibrium point of __________.a. P5, Q3.b. P4, Q4.c. P3, Q3.d. P3, Q5.e. P4, Q2.

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jepessoa

Answer:

c) P3, Q3.

Explanation:

The new long run equilibrium point will be where the aggregate demand curve 1 (AD1) intersects long run aggregate supply curve (LRAS) at P3, Q3.

Since the LRAS curve is horizontal at Q3, all the equilibrium points must be located at Q3, so all you have to check is at what price the AD curve intersects Q3.

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