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The exhibit given below shows the short-run aggregate demand and...

The exhibit given below shows the short-run aggregate demand and supply curves in an economy, AD1and AS1, and the long-run aggregate supply curve, LRAS. The economy was initially in equilibrium when there was a decrease in aggregate demand, causing a shift of the aggregate demand curve from AD1to AD2. Which of the following is true in


  • The economy will move from point D to point C in the long run. 
  • The economy will move from point B to point A in the short run and then to point C in the long run.
  • The economy will move from point D to point A in the short run and then to point C in the long run.
  • The economy will move from point C to point B in the short run and then eventually to point A.

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