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:

Junction

A point where two or more elements meet or connect, especially in the context of biological structures.

Synaptic Vesicles

Small sacs within presynaptic nerve terminals that contain neurotransmitters, critical for transmission of nerve impulses.

Exocytosis

The process by which a cell transports secretory products through the cytoplasm to the plasma membrane and then into the extracellular environment.

Action Potential

A rapid change in electrical potential across the membrane of a nerve or muscle cell when it is stimulated, leading to transmission of an electrical impulse.