Suppose the Economy Is Initially in a Long-Run Macroeconomic Equilibrium

question 8

Multiple Choice

Suppose the economy is initially in a long-run macroeconomic equilibrium.A shock then hits the economy and we observe that the unemployment rate increases and the price level increases.We can conclude that ________ has decreased and there is now a(n) ________ gap.

• A)aggregate supply; inflationary
• B)aggregate demand; recessionary
• C)aggregate supply; recessionary
• D)aggregate demand; inflationary

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Definitions:

Core

The innermost part of the Earth, composed primarily of iron and nickel, divided into a solid inner core and a liquid outer core.

Mantle

The thick layer of the Earth located between the crust and the core, composed of silicate rocks rich in magnesium and iron.

Central Zone

A term that can refer to the central area of a geological feature, a city, or a defined area, known for its significance or distinguishing characteristics.

Regional Elevations

Variations in height or altitude of an area's surface within a specific region, reflecting its topography.