New Keynesian Inflation Dynamics Predicts That an Increase in Aggregate

question 124

Multiple Choice

New Keynesian inflation dynamics predicts that an increase in aggregate demand will generate, in chronological order

• A) a leftward movement along a horizontal short-run aggregate supply curve, a short-run decline in real GDP, a downward shift in the short-run aggregate supply curve, and a decrease in the price level.
• B) a rightward movement along a horizontal short-run aggregate supply curve, a short-run increase in real GDP, an upward shift in the short-run aggregate supply curve, and an increase in the price level.
• C) an leftward shift in a vertical short-run aggregate supply curve, a short-run decline in real GDP, an upward movement along the short-run aggregate supply curve, and an increase in the price level.
• D) a rightward shift in a vertical short-run aggregate supply curve, a short-run increase in real GDP, an upward movement along the short-run aggregate supply curve, and an increase in the price level.

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