Suppose That the Aggregate Demand (ADI)curve in an Economy Is

question 32

Multiple Choice

Suppose that the aggregate demand (ADI) curve in an economy is Y = 10,000 - 10,000
,current inflation ( 11ec9ae2_bd79_1ce7_a39a_a9c7bc0c6307_TB34225555_11 ) equals 0.03 (3%) ,and potential output (Y*) equals 9,700.If,starting from long-run equilibrium,an aggregate supply shock reduces potential output to 9,500,in the short run,there will be a(n) ___________ gap and,in the long run,inflation will equal _________.

• A) expansionary;3%
• B) expansionary;5%
• C) expansionary;7%
• D) recessionary;3%
• E) recessionary;5%

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Definitions:

Operating Activities

Daily business functions and transactions related to a company's core business operations, such as sales, provision of services, and purchasing of raw materials.

Expenses

Costs incurred in the process of earning revenue, including operational costs, utilities, salaries, and rent.

Investing Activities

Transactions involving the purchase and sale of long-term assets and other investments, included in a company's cash flow statement.

Statement of Cash Flows

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents.