If the Fed Decides to Tighten Monetary Policy Because the Inflation

question 85

Multiple Choice

If the Fed decides to tighten monetary policy because the inflation rate has risen to a level inconsistent with economic efficiency and long-term growth:

• A)in the short run the SRAS curve will shift downward and a recessionary gap is created.
• B)in the long run the AD curve will shift to the left and the long-run equilibrium is restored.
• C)in the short run the AD curve shifts to the left and a recessionary gap is created.
• D)in the short run the AD curve shifts to the right and a recessionary gap is created.

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