Beginning at Long-Run Equilibrium in the Dynamic Model of Aggregate

question 33

Multiple Choice

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the first period after the policy change, the DAS curve _____, and the DAD curve _____.

• A)shifts upward; shifts rightward
• B)does not shift; shifts leftward
• C)does not shift; does not shift
• D)shifts downward; shifts leftward

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Definitions:

Share Price

The cost of a single share of a company's stock, determined by market demand and supply.

Raise Funds

The process of gathering financial resources from various sources to support a particular project, venture, or cause.

Optimistic

A disposition or belief that good things will happen and that investment risks are more likely to result in positive outcomes.

Risk-Return Trade-Off

The principle that potential return on investment increases with the amount of risk undertaken in the investment.