The Long Run Result of the Government Responding to a Negative

question 108

Multiple Choice

The long run result of the government responding to a negative supply side shock with increased spending will be a:

• A) faster recovery, but it will cause even greater inflation.
• B) slower recovery, if they misjudge their own spending.
• C) faster recovery at a lower price level than allowing short-run aggregate supply to adjust on its own.
• D) slower recovery, but it will cause inflation to be lower than if they did nothing.