Refer to Figure 19-2. Which of the following would cause the change depicted in the figure above?
A) A new trade agreement with China results in the United States removing all tariffs on clothing imported from China.
B) The Chinese increase their preferences for goods produced in the United States.
C) Lack of investment in infrastructure causes U.S. productivity to fall relative to Chinese productivity.
D) Tainted cat food from China causes U.S. consumers to decrease their preferences for Chinese goods relative to U.S. goods.
Question 2
If weak aggregate demand is pushing the economy into recession, which of the following must be true?
A) The economy is at an equilibrium that is on the long-run Phillips curve.
B) The economy is at an equilibrium that is not on the long-run Phillips curve.
C) Contractionary monetary policies will push the economy back to the long-run Phillips curve.
D) The economy is at an equilibrium that is on the long-run aggregate supply curve.
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