Using Figure 2 below, suppose that the economy started at PAE2. A potential change that could cause the economy to go from PAE2 to PAE1 might be:

Consider the case of a teacher who tells students that those who miss more than three classes for any reason will automatically receive a lower grade

A) This is an example of a positive incentive for students to attend class. B) This is an example of a negative incentive for students to attend class. C) The teacher is assuming that students are irrational, and she must force them to attend class. D) Students who miss more than three classes are irrational.

Starting from long-run equilibrium, an increase in autonomous consumption results in ________ output in the short run and ________ output in the long run.

A. higher; higher B. higher; potential C. lower; higher D. lower; potential