Suppose that the aggregate demand (ADI)curve in an economy is Y = 20,000 - 20,000
,current inflation ( )equals 0.04 (4%),and potential output (Y*)equals 19,200.If,starting from long-run equilibrium,an aggregate supply shock reduces potential output to 18,800,in the short run,there will be a(n)___________ gap and,in the long run,inflation will equal _________.
A) expansionary;4%
B) expansionary;6%
C) expansionary;8%
D) recessionary;4%
E) recessionary;6%

Question

Suppose that the aggregate demand (ADI)curve in an economy is Y = 20,000 - 20,000 
,current inflation (  )equals 0.04 (4%),and potential output (Y*)equals 19,200.If,starting from long-run equilibrium,an aggregate supply shock reduces potential output to 18,800,in the short run,there will be a(n)___________ gap and,in the long run,inflation will equal _________.
A) expansionary;4% 
B) expansionary;6% 
C) expansionary;8% 
D) recessionary;4% 
E) recessionary;6%

Quizplus · Accepted Answer

The Answer of Suppose that the aggregate demand (ADI)curve in an economy is Y = 20,000 - 20,000 
,current inflation (  )equals 0.04 (4%),and potential output (Y*)equals 19,200.If,starting from long-run equilibrium,an aggregate supply shock reduces potential output to 18,800,in the short run,there will be a(n)___________ gap and,in the long run,inflation will equal _________.
A) expansionary;4% 
B) expansionary;6% 
C) expansionary;8% 
D) recessionary;4% 
E) recessionary;6%

Suppose That the Aggregate Demand (ADI)curve in an Economy Is