Suppose That a Shock Causes the Aggregate Demand Curve to Shift

question 196

Multiple Choice

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

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

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Definitions:

Pituitary

A small, pea-sized gland located at the base of the brain, crucial for regulating vital body functions and general wellbeing through hormone secretion.

Thyroid

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A specific weight threshold which, when reached, can significantly influence the health or biological functions of an organism.

Neurological Program

A structured regimen or protocol established for the treatment or study of the nervous system and its disorders.