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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