Compared to an initial long-run equilibrium, an aggregate supply shock that reduces potential output results in a(n) ________ gap in the short run and ________ output and ________ inflation in the long run.
A. expansionary; higher; higher
B. expansionary; lower; higher
C. recessionary; lower; higher
D. recessionary; potential; higher
Answer: B
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Which of the following is NOT a predictable result of a price ceiling set below the market clearing price?
A) an illegal market in the good B) excess quantity supplied C) excess quantity demanded D) lines to purchase the product
Price elasticity of demand along a linear, downward-sloping demand curve decreases as price falls
a. True b. False Indicate whether the statement is true or false
A decrease in consumption caused by a factor other than a change in the price level
A) shifts the AD curve to the right. B) shifts the AD curve to the left. C) causes an upward movement along the existing AD curve. D) causes a downward movement along the existing AD curve. E) none of the above.
If the Federal Reserve unexpectedly decides to sell bonds, which of the following will most likely happen in the short run?
What will be an ideal response?