The AD-AS Model Predicts That a Negative AD Shock Will

question 127

Multiple Choice

The AD-AS model predicts that a negative AD shock will cause the price level to ___________ from the initial to a new long-run equilibrium level.But the model is silent about how fast the price level will ___________ from the initial to the new level;the model cannot explain ___________.

• A) decrease;decrease;the inflation rate
• B) decrease;decrease;the price level
• C) increase;increase;the inflation rate
• D) decrease;decrease;stagflation
• E) increase;increase;the price level

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