Refer to the accompanying figure.Starting from long-run equilibrium at point C, a favorable inflation shock that decreases inflation from ? to ?1 will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.

A. B; C
B. A; B
C. B; A
D. A; C


Answer: D

Economics

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