When a society cannot produce all the goods and services people wish to have, it is said that the economy is experiencing

Which of the following statements is true?

A) If both demand and supply increase there must be an increase in equilibrium price; equilibrium quantity may either increase or decrease. B) An increase in demand causes a change in equilibrium price; the change in price does not cause a further change in demand or supply. C) If demand decreases and supply increases one cannot determine if equilibrium price will increase or decrease without knowing which change is greater. D) A decrease in supply causes equilibrium price to rise; the increase in price then results in a decrease in demand.

Based on the graph above, a cause of movement from point 1 to point 2 might be ________

A) a positive price shock B) government policy that lowers unemployment C) an increase in potential output D) an increase in expected inflation E) none of the above