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AP® Macroeconomics

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Difficult

Business Cycle and the AD/AS Model

APMACR-FVDEI3

A country is operating at the trough of a business cycle.

What can be said about this country in terms of aggregate supply and aggregate demand?

A

Short-run aggregate supply and aggregate demand are in long-run equilibrium.

B

Short-run aggregate supply and aggregate demand are intersecting to the right of long-run aggregate supply.

C

Short-run aggregate supply and aggregate demand are intersecting to the left of long-run aggregate supply.

D

Short-run aggregate supply and aggregate demand are intersecting with each other and with long-run aggregate supply in the same place.

E

Short-run aggregate supply and aggregate demand are showing an inflationary gap.