Starting from a Position of Long- Run Equilibrium, Suppose That

question 23

Multiple Choice

Starting from a position of long- run equilibrium, suppose that a shock causes the aggregate demand curve to shift rightward. If the RBA does nothing,

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

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