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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Definitions:

Motions

Movements or the act of changing place, position, or posture, often studied in the context of physics.

Continuous

Describes an unbroken or uninterrupted sequence or extent of something, often referring to processes, functions, or variables in mathematics or physics.

Intermolecular Forces

Forces of attraction or repulsion which act between neighboring particles (atoms, molecules, or ions) influencing the properties of substances.

Compressible

Describes a characteristic of materials or substances that can have their volume significantly reduced under pressure.