Use the graph below to answer the questions that follow.

a.Which of the points A, B, C, or D can represent a long-run equilibrium?

b.Suppose that initially the economy is at point A.If aggregate demand increases from AD₁ to AD₂, which point represents short-run equilibrium? Which point represents the eventual long-run equilibrium?Briefly explain how the economy adjusts from the short-run equilibrium to the long-run equilibrium.

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