(a) (b) (c) AS(P100) AS(P125) AS(P75)

P Q P Q P Q

125 $560 125 $500 125 $620

100 500 100 440 100 560

75 440 75 380 75 500

Suppose the full employment level of real output (Q) for a hypothetical economy is $500, the price level (P) initially is 100, and prices and wages are flexible both upward and downward. Refer to the accompanying short-run aggregate supply schedules. If the price level unexpectedly declines from 100 to 75, the level of real output, in the long run, will

a. rise from $500 to $560.

b. fall from $500 to $440.

c. fall from $560 to $500.

d. return to $500.

Suppose someone wants to sell a piece of land for cash. the selling of a piece of land represents turning

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