Use the following to answer question 90: Exhibit: Shift in Aggregate Demand LRAS B E Po SRAS AD CAD CAD 90

Use the following to answer question 90: Exhibit: Shift in Aggregate Demand LRAS B E Po SRAS AD CAD CAD 90. (Exhibit: Shift in Aggregate Demand) In this graph, initially the economy is at point E, with price P. and output Y. Aggregate demand is given by curve AD, and SRAS and LRAS represent, respectively, short-run and long-run aggregate supply. Now assume that the aggregate demand curve shifts so that it is represented by AD. The economy moves first to point and then, in the long run, to point A) A;D B) C;B C) D; A D) B: C 91. When there is a short run supply shock (perhaps because input prices increase) then economic theory tells us that the economic output will decline in the short run because: A) wage contracts fix wages and wages cannot decline in the short run (are inflexible). B) it doesn't affect the economy. c) input price contracts fix input prices and prices cannot decline in the short run (are inflexible). D) input price and wages contracts fix input prices and wages and cannot decline in the short run (are inflexible)