Suppose that an economy begins at theshort-run equilibrium shown as point A in the figure to the right.

Identify which of the other points on the diagrampoints B, C, D, or Ecould represent a new short-run equilibrium after the described events given below take place and move the economy away from point A.

RealGDPperYear($trillions)

PriceLevel

AD1

SRAS1

AD2

AD3

SRAS3

SRAS2

B

C

D

A

E

The image is a graph that shows the relationship between real GDP and price level for an economy. The horizontal axis measures the real GDP per year in trillions of dollars. The vertical axis measures the price level. In the graph, AD subscript 1 is the initial downward-sloping aggregate demand curve and SRAS subscript 1 is the initial upward-sloping short-run aggregate supply curve. AD subscript 1 and SRAS subscript 1 intersect at point A, which is the point of short-run equilibrium for the economy. AD subscript 2 lies parallel to the right of AD subscript 1 and AD subscript 3 lies parallel to the left of AD subscript 1. SRAS subscript 2 lies parallel to the right of SRAS subscript 1 and SRAS subscript 3 lies parallel to the left of SRAS subscript 1. Apart from A, there are 4 points marked in the graph- B, C, D, and E. AD subscript 2 intersects SRAS subscript 2 at point D and SRAS subscript 3 at point B. AD subscript 3 intersects SRAS subscript 2 at point C and SRAS subscript 3 at point E.

EVENT

New Point

Few workers in thisnation's economy are unionmembers, and unions have sheepishlyconsentedto large wage givebacks. At the sametime, economic conditions suddenly improve abroad, raising real GDP and disposable income in other nations of the world.

nothing