Suppose That a Shock Causes the Aggregate Demand Curve to Shift

question 82

Multiple Choice

Suppose that a shock causes the aggregate demand curve to shift rightward. If the Fed does nothing,

• A) the short- run aggregate supply curve will not shift leftward and there will be continued inflation.
• B) output initially will exceed potential GDP, but the economy will return to potential GDP with a higher price level.
• C) eventually the short- run aggregate supply curve will shift leftward and there will be continued inflation.
• D) the economy will experience a temporary reduction in employment but will eventually return to full employment.

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Definitions:

Brachial Artery

A significant artery in the upper arm responsible for delivering blood to both the arm and hand.

Carotid Artery

A major artery located on each side of the neck that supplies blood to the brain, neck, and face.

Second Heart Sound

The heart sound produced by the closing of the semilunar valves (aortic and pulmonary) at the beginning of ventricular diastole.

Cardiac Cycle

The sequence of events that occur in a complete heartbeat, including diastole and systole phases.