Suppose That the Economy Is Initially in a Long- Run

question 98

Multiple Choice

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

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